Bank of England Holds off on Further QE

The Bank of England will not be injecting more cash into the economy following a meeting of the Monetary Policy Committee (MPC). The MPC meet regularly to decide what to do with regards to Britain’s economy and the flow of money from the bank, and one of the things they vote on is whether to continue the process of quantitative easing (QE) whereby the Bank buys back government gilts from investment banks in order to give them a cash injection and allow them to give out more loans.

The move has come as something of a surprise to some spectators as there have been indications from members of the MPC that they are worried about the way the economy is going. The Ernst & Young ITEM Club’s Nida Ali is one of these, saying she found the decision “a little surprising in light of the dovish comments made by several Committee members since the last meeting. There is a real sense of “if not now, then when?”. The MPC are sending mixed signals which are adding to the sense of uncertainty. We would be strongly in favour of looser monetary policy and had been encouraged by the MPC’s recent comments and by signs that they were starting to think outside the box. But talk is cheap and it is time that they delivered.”

The data she is referring to are reports emerging that although we may be in a period of little recovery at the moment, there does appear to be some light at the end of the tunnel. The British Chamber of Commerce recently released a report claiming this was the case, with chief economist David Kern saying: “We expect quarterly growth to increase very gradually over the next two years, but it will remain modest and below-trend for some time. In addition, we now expect GDP to return to its pre-recession levels early in 2015 and the squeeze on living standards will continue for a while longer.”

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