DCSIMG

Bank must use

The Bank of England's Monetary Policy Committee will announce its decision at midday on Thursday

The Bank of England's Monetary Policy Committee will announce its decision at midday on Thursday

 

The Bank of England must use its programme of pumping more cash into the economy “more efficiently”, a Lancashire business leader has claimed.

Babs Murphy, chief executive of the North and Western Lancashire Chamber of Commerce, said the Bank and the Government needed to consider more than just its quantitative easing (QE) programme and low interest rates to stimulate the economy.

The Bank’s rate-setting Monetary Policy Committee (MPC) is expected to hold rates at 0.5% and not add to the £375bn it has injected through QE so far.

The Chamber chief said any further increase in QE would be “misguided” and increase the risk of higher inflation.

She said: “To boost growth, the MPC and the government should take steps to support a revival in business lending, by using the existing QE programme more efficiently and by considering tools other than QE alone.

“If the MPC agrees to purchase private assets other than gilts, such as securitised small business loans, banks would be less risk-averse in lending to businesses.”

She said the Chamber’s economists predicted inflation would “fall less than initially thought” next year but said a fall would be “beneficial” to the economy, even if it fell below the Bank’s 2% target.

The Consumer Prices Index, the Bank’s preferred measure of increases in the cost of living, is currently 2.2%.

Babs Murphy added: “A fall in inflation would underpin real incomes and support demand at a time when growth prospects remain weak.”

The MPC started its monthly meeting to discuss interest rates and further QE on Wednesday and will announce its decision at midday on Thursday.

Last week, MPC member Ben Broadbent told the Evening Post he expected interest rates to remain “pretty flat for a pretty long time” and admitted he had not made his mind up on a further injection of QE.

 

Comments

 
 

Back to the top of the page