Shadow MPC calls for QE to be extended

<div>QUANTITATIVE EASING (QE) should be extended this month to ensure the sustainability of the UK&rsquo;s fragile economic recovery, say a majority of City A.M.&rsquo;s shadow monetary policy committee, ahead of the Bank of England decision, which is due at midday today.<br /><br />Concerns about the sustainability of UK&rsquo;s economic recovery and the uncertainty of policy effectiveness mean that eight out of the committee&rsquo;s nine members have called for further QE this month.<br /><br />Graeme Leach, chief economist at the Institute of Directors, chose not to recommend an extension to QE because the effect of the policy has not yet been fully realised.<br /><br />However, Leach noted that it was nonetheless a &ldquo;close call&rdquo; to choose not to extend QE.<br /><br />Previous statements and minutes of MPC meetings indicate the Bank of England is not yet finished with QE and recent disappointing data and fears of a double-dip recession have increased the clamour for the Bank of England&rsquo;s MPC to extend QE.<br /><br />A number of economists &ndash; including Capital Economics&rsquo; Vicky Redwood and Lloyds TSB&rsquo;s Trevor Williams &ndash; believe the MPC should ask the chancellor to authorise further asset purchases beyond &pound;150bn, should it become necessary at a later stage to ensure the UK economy remains on a sustainable path to recovery.<br /><br />Henderson New Star&rsquo;s Simon Ward recommends that while QE should be expanded by another &pound;25bn, the pace of asset purchases should be halved to &pound;12.5bn a month.<br /><br />However, the monetary policy committee could delay the big decisions until August, which is an inflation report month. So far the monetary policy committee has announced QE of &pound;125bn and as of 2 July, the Bank of England had bought &pound;105.5bn worth of assets.</div>