Further QE increases should not be considered for the time being

  • “It is encouraging that two MPC members voted against the £50bn increase in QE”, says David Kern

Commenting on the MPC minutes published today by the Bank of England, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said:

“While most commentators expected the recent decision on an increase in QE to have been unanimous, we are encouraged that two members of the committee voted against this move. The argument for increasing QE was questionable in our view, although the impacts of the eurozone crisis on the financial system make it understandable. The new funding for lending scheme could potentially be more important for businesses as long as the banks pass on the lower cost of funds to their customers. However, we are convinced that a state-backed business bank is necessary to allow viable businesses with growth potential to obtain funds on reasonable terms.

“No further QE increases should be considered for the time being unless the UK financial system faces new major threats. QE is not risk free and the longer-term inflation dangers associated with it cannot be ignored. It should certainly not be used to try and prevent inflation from falling temporarily below target next year. After a long period when above target inflation has heightened the squeeze on businesses and consumers, lower inflation will now support domestic demand in the economy and this should be allowed to continue.”

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