Bank of England expected to sanction more QE in November

Group Business Editor

Friday 5 October 2012

EXPERTS forecast the Bank of England would have to provide more monetary stimulus to the troubled UK economy next month, after its Monetary Policy Committee (MPC) held base rates at 0.5% and maintained the scale of quantitative easing (QE) at £375 billion yesterday.

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Ian McConnell

When the Bank announced a further £50bn of QE in July, to take it to £375bn, it estimated this would take until November to implement. QE is aimed at stimulating activity by boosting money supply through the purchase of Government and corporate bonds using central bank reserves.

Chris Williamson, chief economist at financial information company Markit, said: "There is a growing expectation the Bank will sanction more quantitative easing in November, which is when the current round of asset purchases expires and the next quarterly inflation report is due to be published. The recent flow of economic data suggests the Bank will be forced to revise down its growth forecasts again for this year and 2013."Martin Beck, of consultancy Capital Economics, said: "The MPC's decision to leave policy on hold - was predictable given the absence of any major economic surprises in recent weeks. "We still expect more asset purchases to be announced in November. There is a fair chance that the committee will cut interest rates further too." He added: "Even though the current £50bn of asset purchases will not be completed until November, one member appeared to be close to voting for more stimulus in September. "And the evidence of an insipid economy from the recent Chartered Institute of Purchasing and Supply surveys may have encouraged more MPC members to consider more loosening - The pressure on policymakers to do more to boost growth has not been eased by recent economic data."But Mr Beck suspected the MPC, chaired by Bank governor Sir Mervyn King, would have been unanimous yesterday.Howard Archer, chief UK economist at consultancy IHS Global Insight, said: "We believe the odds are still heavily slanted towards more Bank of England stimulus in November, most likely in the form of a further £50bn of quantitative easing."Stephen Boyle, head of group economics at Royal Bank of Scotland, said: "I would have been flabbergasted if the committee had changed its stance this month. The Bank will wait at least until November before making another move." He said the MPC would then know how the Bank of England and UK Government's £80bn Funding for Lending scheme, aimed at boosting loans to businesses and households, and July's QE rise have affected conditions.

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Bank of England expected to sanction more QE in November

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