More QE would only provide marginal benefits

3rd October 2012

Commenting ahead of the MPC decision tomorrow (Thursday), David Kern, Chief Economist at the British Chambers of Commerce (BCC), said:  -We expect the MPC to make no changes this month, holding interest rates at 0.

5% and the Quantitative Easing (QE) programme at £375bn. But, in reaction to weaker global growth and worsening problems in the eurozone, we expect a further increase in QE before the end of the year. -QE played a valuable role in the early stages of the financial crisis in 2009. But, with yields on gilts at very low levels already, more QE would only provide marginal benefits for the real economy, while creating longer-term risks of bubbles, financial distortions, and higher inflation. An increase in QE should not be used to prevent inflation from falling below the 2% target in 2013. A temporary fall in inflation would be beneficial, as it would underpin real incomes and support demand at a time when UK growth prospects remain weak. More QE should only be considered if problems in the eurozone pose new threats to the UK banking system, -To boost growth, the MPC and the government should take more effective steps to support a revival in business lending, both by using the existing QE programme more efficiently, and by employing tools other than QE alone. If the MPC agrees to purchase private assets other than gilts, such as securitised SME loans, banks would be less risk-averse in lending to businesses. The Funding for Lending scheme must be used more effectively and the government's promise to establish a fully-fledged British Business Bank must be implemented without undue delay.  

You might also be interested in

HMRC to close CHIEF: What does this mean for you?

Fri 6th May 2022

Last year HMRC announced that the Customs Handling of Import & Export Freight Computer system (CHIEF ) currently used to lodge import and export declarations will be fully replaced by a new system called the Customs Declaration Service (CDS) in 2023.

South Yorkshire Chambers Unite to Call for Mayor-led Transformation of Region's Skills Sector

Fri 29th April 2022

Business leaders from across South Yorkshire will join forces today (Friday) to call for the region’s new Mayor to urgently tackle skills shortages that are holding the region back.

Recruitment Difficulties Remain at Record Highs - Quarterly Recruitment Outlook

Thu 28th April 2022

Latest figures released today by the British Chambers of Commerce show the pressure on firms struggling to recruit staff remains at record high levels.

Climate change is the biggest challenge of our lifetime.

Wed 13th April 2022

According to scientists at the Intergovernmental Panel on Climate Change (IPCC), global temperature increase must be limited to no more than 1.5°C to preserve our current way of life.