MPC Should Increase QE by £50bn in February

Commenting on the MPC minutes for January 2012, published today by the Bank of England, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said:

“Unsurprisingly, the minutes show that the MPC voted unanimously at its last meeting to maintain interest rates at 0.5% and the Quantitative Easing programme at £275bn. Following the latest GDP figures showing the economy shrank at the end of 2011, there is a strong case for the MPC to increase QE to £325bn at its next meeting. While QE is not a panacea, and can cause problems for savers and pension funds, the overriding priority should be to avoid a recession.

“Increasing QE would help sustain demand in the economy, and keeping the exchange rate competitive would help British exporters cope with challenges resulting from the eurozone debt crisis. But an increase in QE will only be truly successful if supplemented by effective credit easing measures and policies to support growth, such as cutting red tape and scrapping the planned rise in business rates.”