QE boosts UK money supply

QUANTITATIVE EASING is finally starting to boost Britain&rsquo;s money supply, according to July data from the Bank of England yesterday.<br /><br />The Bank&rsquo;s preferred measure of broad money supply &ndash; M4 excluding money holdings of intermediate other financial corporations &ndash; rose by 0.6 per cent in July. Even more encouraging was the three-month annual growth rate, which jumped to 5.3 per cent from 1.2 per cent.<br /><br />The headline broad money figure is estimated to have risen by an annual 3.9 per cent in July.<br /><br />The Bank extended its quantitative easing programme last month by &pound;75bn because it perceived that the broad money supply remained too weak. Although monthly data is often dismissed as too volatile, economists were cautiously optimistic.<br /><br />Simon Ward, chief economist at Henderson New Star, said: &ldquo;Statistics released today are more encouraging, supporting recovery hopes and reducing the chances of QE expansion.&rdquo;<br /><br />But Jamie Dannhauser at Lombard Street Research warned against complacency, arguing there was more to be done. &ldquo;Monetary growth needs to be sustained in the six to eight per cent range in order to ensure recovery in 2010,&rdquo; he added.