Commenting on the MPC minutes for November, published today by the Bank of England, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said:
“The minutes reveal that the Monetary Policy Committee voted unanimously to leave rates on hold at 0.5% and also for an increase in Quantitative Easing to £275bn. We agree with the MPC that inflation is likely to fall sharply in the first half of 2012, and then fall more moderately in the second half of the year. However, the minutes highlight the uncertainties surrounding the long-term outlook for inflation, beyond 2012.
“Since the increase in QE will take some three months to complete, it is not surprising that at its latest meeting, the MPC did not increase the programme further. However, given the risks that the economy faces over the next few months, namely a difficult eurozone situation and increasing UK unemployment, the MPC may be justified in expanding the QE programme further in the early months of 2012.
“The increase in Quantitative Easing will help to sustain demand in the economy, but it would be more effective if the MPC was prepared to purchase private sector assets. This could help improve the availability of credit to businesses. We expect the Chancellor to announce a major credit easing programme in next week’s Autumn Statement, and we hope that the MPC will play its part to support this plan.”