Cash supply fall fuels QE doubts

The Money supply fell by 0.5 per cent in December, raising fresh questions over the Bank of England’s £200bn programme designed to reflate the economy.

The Bank’s preferred measure of bank and building society deposits declined by £6.7bn after a marginal rise in November.

Coupled with the UK’s disappointing 0.1 per cent growth in the final quarter of 2009, the drop could put pressure on governor Mervyn King to carry on the central bank’s package of gilt repurchases – or quantitative easing (QE) – due to end this week.