Member Article

Bank of England maintain QE and interest rates

The British Chamber of Commerce (BCC) has welcomed the Bank of England’s decision to hold quantitative easing and interest at their current rates.

BoE announced that bank rates paid on commercial reserves will be maintained at 0.5%, and quantitative easing will remain at £375bn.

Chief economist at the BCC, David Kern, reacted with subdued positivity, and said the decision was largely in line with the Chamber’s expectations.

The Monetary Policy Committee at BoE reportedly voted 8 to 1 on the issue, and its stance on quantitative easing is not expected to change in the next 12 months.

David Kern commented: “Our members do not support some of the current gloom about the economy, despite of the possibility that GDP growth will slow sharply in Q4 2012. Given these circumstances, we believe that pressures for more QE should be resisted.

“Adding to QE should only be considered if new threats emerge to the stability of the UK banking system.

“We believe that further QE would provide only marginal benefits for the real economy, while heightening longer-term risks of financial distortions, bubbles and higher inflation.

“Instead, the MPC should use the existing QE programme more effectively to support a revival in business lending.

“If the MPC agreed to use QE to purchase private assets other than gilts, such as securitised SME loans, banks would be less risk-averse in lending to businesses. “Greater efforts must also be made to ensure that the Funding for Lending scheme operates more effectively.

“On its part, the government must move more resolutely to establish a fully-fledged British Business Bank.”

This was posted in Bdaily's Members' News section by Miranda Dobson .