Quantitative easing decision on a knife edge, say analysts

Ben Southwood
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THE BANK’S decision whether or not to expand the quantitative easing programme could go either way, analysts said yesterday.

Weak business surveys and gloomy industrial production data could push the bank to add £25bn or more to its gilt portfolio, analysts said, but better-than-expected GDP growth would push rate-setters in the opposite direction.

City A.M.’s shadow MPC were unanimous in voting to keep rates on hold, but in an indication of how tight the decision could be three members voted to expand quantitative easing (QE).

“It will be a close decision at today’s monetary policy committee (MPC) meeting,” said Vicky Redwood at Capital Economics. “We think that the chances of more QE have slipped a touch below 50/50, and if the MPC does vote for more QE, it might be £25bn rather than £50bn.”

Howard Archer at IHS Global Insight, agreed with Redwood that rising inflation and the positive GDP figures were likely to sway the balance against further QE.

He expects the Bank will increase the stock of QE by £50bn at some point in the first quarter of next year – but he said gloomy data could prompt an early move.