Bank of England moves on QE
THE Bank of England today launched a fresh round of quantitative easing to try and stimulate the UK economy.
As had been widely predicted, the Monetary Policy Committee gave the green light to a £50bn expansion of the Bank’s QE programme taking the overall total to £325bn.
However, the committee opted for no change on interest rates, keeping them at 0.5%.
Analysts had expected the MPC to act on QE amid continued concern about growth in 2012 and figures showing the economy contracted in the final quarter of 2011.
The Birmingham Chamber of Commerce Group had been one of the organisations pressing the MPC to increase QE to stimulate the flow of money into the economy.
However, Andrew Connors, Area Director for Lloyds Bank Wholesale Banking & Markets in the West Midlands, said the situation was not as bad as many had feared.
He said: “After a small contraction in GDP in the last quarter of 2011, improvements in the manufacturing and services sectors suggest that we should avoid the two consecutive quarters of negative growth which technically defines a recession.
“In fact, our economics team is anticipating a small upturn for the first quarter of this year of about 0.2%. This matches a marginal increase in business confidence in December, but the rise comes from a very low base and remains in negative territory – although significantly higher than the low point of 2009.
“The good news for consumers is that inflation is beginning to fall which will help return more real income to them. But it’s still not the case that price inflation is below wage inflation meaning that consumers will be more keen to save than spend for the foreseeable future.”
The statements come as data published this morning showed manufacturing output grew by 1% between November and December and by 0.8% year-on-year while the trade deficit shrank from £2.8bn to £1.1bn.
Richard Halstead, Midlands region director at EEF, the manufacturers’ organisation said: “December’s production figures show the fourth quarter wasn’t a complete write off with the strong rebound in manufacturing output hopefully providing a solid platform for continued recovery in the first quarter. In line with a lot of positive reporting and anecdotal evidence we are continuing to see some strong sector performances, especially those with long lead times and exposure to emerging markets.”
