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£50bn in Quantitative Easing
Double-dip recession fears may lead monetary policy committee to act this week
http://www.guardian.co.uk/
The Bank of England will agree this week to spend another £50bn of electronic money in a bid to boost bank lending and aid the recovery, City experts predict.
The threat of a double-dip recession will force the bank's monetary policy committee (MPC) to set aside fears about inflation to increase its programme of quantitative easing (QE) from £200bn, with the possibility of rising to £300bn if the economy fails to improve in 2012.
Phil Shaw, of Investec Securities, said the MPC would support £50bn this month and £50bn more in February. "There is a very good case for being bold and acting promptly. The downside risks posed by the tightness of markets calls for action now … we suspect that the run of international meetings in Washington has impressed on the global authorities the severity of the situation," he said.
But he warned that delays to publication of GDP data by the Office for National Statistics could encourage a majority of members to postpone a decision until November.
Lloyds Bank Corporate Markets, and the US investment bank Citi said further QE was likely. Michael Saunders, chief economist at Citi, expects the Bank will have to spend up to £300bn in additional QE to provide an "adequate stimulus".
Some of Britain's biggest business lobby groups have urged the MPC to guard against complacency while the UK economy is suffering and the eurozone is still in the throes of its debt crisis.
Several MPC members have indicated recently that the depressed UK economy could demand a further round of QE, which involves the bank buying government bonds from banks to boost their finances and improve lending rates.
The external MPC members Martin Weale, David Miles and Ben Broadbent are expected to join the US economist Adam Posen in voting for more QE, with the bank's chief economist, Spencer Dale, Charlie Bean and Paul Tucker arguing for a delay until November. In this case, the governor, Mervyn King, would need to vote against his central bank colleagues for QE to go ahead.
The threat of a double-dip recession will force the bank's monetary policy committee (MPC) to set aside fears about inflation to increase its programme of quantitative easing (QE) from £200bn, with the possibility of rising to £300bn if the economy fails to improve in 2012.
Phil Shaw, of Investec Securities, said the MPC would support £50bn this month and £50bn more in February. "There is a very good case for being bold and acting promptly. The downside risks posed by the tightness of markets calls for action now … we suspect that the run of international meetings in Washington has impressed on the global authorities the severity of the situation," he said.
But he warned that delays to publication of GDP data by the Office for National Statistics could encourage a majority of members to postpone a decision until November.
Lloyds Bank Corporate Markets, and the US investment bank Citi said further QE was likely. Michael Saunders, chief economist at Citi, expects the Bank will have to spend up to £300bn in additional QE to provide an "adequate stimulus".
Some of Britain's biggest business lobby groups have urged the MPC to guard against complacency while the UK economy is suffering and the eurozone is still in the throes of its debt crisis.
Several MPC members have indicated recently that the depressed UK economy could demand a further round of QE, which involves the bank buying government bonds from banks to boost their finances and improve lending rates.
The external MPC members Martin Weale, David Miles and Ben Broadbent are expected to join the US economist Adam Posen in voting for more QE, with the bank's chief economist, Spencer Dale, Charlie Bean and Paul Tucker arguing for a delay until November. In this case, the governor, Mervyn King, would need to vote against his central bank colleagues for QE to go ahead.
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