"The minutes of last month’s MPC meeting showed growing support for a rise in Quantitative Easing. Given the current economic situation, both globally and in the UK, it is likely that the committee will announce a £50bn increase in QE next week. This is understandable, especially since the eurozone crisis is now increasing funding costs for UK banks which are harming both businesses and consumers.
"But QE might not be the most effective way to achieve this, as its benefits for economic growth are at best marginal. A more direct way to reduce the higher funding costs facing UK banks would be to implement the lending and liquidity schemes announced by the Chancellor and Governor in their Mansion House speeches.
"Adding to QE is not a risk-free policy, as it will limit the decline in inflation at a time when it is important for it to fall. This will be the most important single factor likely to underpin real incomes and boost demand in the UK economy over the next year. At the moment, adding to QE may prove to be counter-productive."