Bank of England expected to release another £50bn of quantitative easing
ECONOMISTS widely expect at least another £50bn of quantitative easing (QE) to be announced by the Bank of England’s Monetary Policy Committee (MPC) on Thursday.
Committee members including governor Mervyn King have dropped clear hints that they will buy more government bonds to lower interest rates and boost demand, slowing inflation’s rapid decline with the aim of hitting the two per cent target in the medium term.
Economists at Barclays Capital believe the inflationary impact of QE may have been overstated.
“Money and credit in the economy continued to shrink in December, and the additional £50bn of QE we expect is unlikely to halt the slide,” said Chris Crowe, arguing the link between QE and nominal income is weaker than previously assumed.
Meanwhile economists at Citi believe the MPC will go further through 2012, predicting QE will reach £600bn by the end of the year.
“For the February meeting we forecast the MPC will expand QE by £75bn,” said economist Michael Saunders. For the longer-term picture, “our view is partly based on our view that as inflation slows the MPC will be more willing than many expect to use QE to boost the economy against a range of headwinds”.