· The MPC should increase QE next month by £50bn to £325bn
Commenting on today’s Monetary Policy Committee (MPC) decision, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said:
“The decision by the Monetary Policy Committee to leave interest rates unchanged was widely expected. However, the committee’s decision to leave quantitative easing (QE) at current levels is disappointing.
“In the face of worsening economic prospects in the Eurozone, and weakening UK growth, the Bank of England and the government must make every effort to underpin business confidence and avoid a setback. The latest economic data underlines the need for urgent action. The recent OBR forecast predicts a contraction in the current quarter, and the latest disappointing manufacturing figures showed the first three-month on three-month fall in two years.
“In light of the risks facing Britain’s recovery, a further £50bn increase in QE to £325bn would be welcomed by business. While many commentators expected the MPC to wait until the New Year, an early announcement would have strengthened confidence. Crucially, it would help to contain sterling rises against the euro, at a time when we must maintain the competitiveness of our exports.
“But quantitative easing is only part of the puzzle. QE can only achieve its full potential to support growth if it is supplemented by effective measures aimed at improving the flow of credit to viable businesses. The government should give this matter the highest priority, and implement the credit-easing programme at the earliest opportunity.”