City A.M. shadow MPC votes 7-2 against more QE

ALLISTER HEATH | CITY A.M.
“No change. There is no longer any lack of money supply, and the services sector purchasing managers’ index business survey suggests we may just about escape a triple-dip, if we are lucky. The real problem in the UK is that ultra-loose monetary policy is keeping zombie firms alive, slowing the readjustment. More quantitative easing (QE) would be a big mistake.”

GRAEME LEACH | INSTITUTE OF DIRECTORS
“I think the monetary policy committee should sit down and do nothing this month. There’s no need to change any policy, although there probably needs to be a bias towards a small extension in the gilt purchase programme in March or April later this year.”

GEORGE BUCKLEY | DEUTSCHE BANK
“With the economy expected to gradually recover during 2013 the Bank needs to be mindful of its primary responsibility – price stability. We therefore argue for no further change on rates or the asset purchase programme.”

VICKY REDWOOD | CAPITAL ECONOMICS
“Cut rates to 0.25 per cent and restart the QE programme with another £50bn of asset purchases. The economy is close to a triple-dip and the improvement in market sentinment probably won’t last. Inflation is above target, but will come down later this year.

ROBERT WOOD | BERENBERG BANK
“More monetary medicine is needed – £50bn more QE. The Bank of England should announce that redemptions of gilts will be reinvested. The economy is moving sideways. Uncertainty plagues investment decisions and the fiscal consolidation is biting. Carney’s reminder that monetary policy is not maxed out is already helping.”

SIMON WARD | HENDERSON
“Hold policy on both counts. Business surveys confirm that the economy is improving. Money supply growth is at a post-recession high, with corporate liquidity surging. The key risk to the economy now is another inflation spike, not insufficiently loose policy.”

VICKY PRYCE | FORMER GOVT ADVISER
“Hold but keep options open for further QE despite concerns about higher energy and food prices. The first quarter of 2013 may show small growth but a still uncertain external environment, weak construction activity and restrained household spending will remain a drag on growth.”

TREVOR WILLIAMS | LLOYDS BANK
“Keep rates on hold with a neutral policy stance, and keep QE unchanged. The UK is not performing as badly as the preliminary estimate of a 0.3 per cent drop in GDP in the fourth quarter of 2012 suggests. Lloyds Bank’s monthly business survey suggests recovery this quarter, so no triple-dip.”

ROSS WALKER | RBS
“I vote no change on either the asset purchase programme or interest rate policy. Little has changed in recent months in terms of the basic economic fundamentals – the recovery remains fragile while inflation stickiness persists.”

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