QE2 needed to combat weak global economic outlook, says MPC’s Dale

Tim Wallace
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THE NEW round of quantitative easing (QE2) is necessary to boost the UK’s economy and keep inflation from falling below target, according to Bank of England chief economist Spencer Dale (pictured), speaking yesterday.

Last Thursday’s monetary policy committee (MPC) meeting saw the asset purchase programme extended by £75bn, from the current level of £200bn.

International problems are pushing the economy downward, Dale told Reuters, and those international pressures will be the main factor the committee will take into account when deciding future moves.

“I can’t think of any obvious period in history where we’ve seen such an acute and prolonged period of financial turmoil,” he said.

“But I think what’s very different now to the Great Depression is what’s happening in the real economy,” he said.

The comments follow MPC governor Sir Mervyn King’s claim last week that the financial crisis may be the worst even seen.

Dale voted for a 0.25 per cent increase in interest rates in every monthly meeting from February through to July of this year.

CPI inflation stands at 4.5 per cent, well above target – but the MPC loosened policy further because it fears inflation will fall below target in the future.

The minutes released next week will show whether or not he backed QE’s expansion.