QUANTITATIVE easing (QE) has run its course and is no longer capable of stimulating the UK economy, a Westminster think tank will argue this morning.
The group’s report calls on the Bank of England to shake up its monthly consideration of whether or not the economy requires more asset purchases.
“QE is past its sell by date. It was a short term solution to a crisis, but with unpleasant side effects. The Bank needs to move on from the monthly ritual of discussing QE,” said Jo Owen, a former partner at Accenture who authored the report.
QE is culpable of propping up asset bubbles, and resulting in an economy dependent on cheap money, the report says.
The policy, which has seen the Bank buy up £375bn in assets, has also created a situation where it is difficult to unwind, due to the fragility of the recovery, the liberal -leaning Centre Forum will add.
It will argue for more imaginative measures, “such as remunerating marginal excess reserves by the banks at below the base rate to encourage more lending, and recapitalising RBS and Lloyds”.
The report concludes that monetary easing cannot be the only means of stimulating growth, and calls on government to increase capital spending.