More money printing off the menu for cautious rate-setters

Ben Southwood
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BANK of England policymakers will keep the printing presses out of action again in January, analysts predicted over the weekend.

A more positive raft of data releases, combined with renewed concerns about the effectiveness of the quantitative easing (QE) programme, will stay a new bout of monetary expansion, according to market observers.

“We expect the QE target to remain at £375bn and there are few prospects of a move in the Bank rate from 0.5 per cent, where the official benchmark has been for almost four years,” said Investec’s Philip Shaw.

“There seemed to be few clear intentions to ease again in December and although there have since been one or two notable weak spots in the data, the general tone of the UK indicators has been more mixed than soft.”

This came after a Bank research paper that suggested the impact of one-off demand shocks on the UK’s slow recovery had been exaggerated, and that supply-side factors, especially weak productivity, were at least as important as blows to demand.

Since QE is designed to boost the total level of demand in the economy and does nothing to deal with long-run structural and supply-side concerns, the paper appears to favour a more limited role for asset purchases in future.