MPC Should Announce a Further Increase in QE, Says BCC

Commenting ahead of the MPC decision on Thursday, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said:

“With the government implementing its tough deficit-cutting measures, and while the eurozone’s problems create worldwide banking risks, UK monetary policy must remain as expansionary as possible. The disappointing forecast issued by the OBR, with a prediction of negative growth in the current quarter, shows how important it is for the government to introduce measures which will help to stimulate the economy.

“Given the current economic challenges, we believe that the MPC should announce a further £50bn increase in the QE programme on Thursday, to £325bn. While many commentators expect the MPC to wait until early in the new year, we feel that an announcement now would not only strengthen confidence, but would help to counter the downbeat mood which has followed the recent projections by the OBR.

“But QE on its own will not achieve its full potential to support growth. Effective measures aimed at improving the flow of credit to viable businesses must be introduced as a matter of priority. The government should also act quickly to implement the credit-easing measures announced by the Chancellor in the Autumn Statement.”