MPC minutes signal increased pressure for more QE

20th February 2013

Commenting on the publication of the minutes of the Monetary Policy Committee (MPC) decision, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said: -The minutes provided a number of surprises, and signal increased pressures for more QE in the near future.

  The vote earlier in the month for maintaining QE at £3.75bn was six to three; a significant change from the eight to one majority recorded in previous months. -It is widely assumed that incoming Governor Mark Carney favours more aggressive, expansionary policies.  The minutes suggest the MPC may move in this direction even before his arrival.  The BCC's view remains that caution needs to be exercised before raising QE, to avoid longer term risks of bubbles and high inflation.  With CPI inflation likely to remain above the 2% target over the next few years, measures that limit falls in inflation could squeeze incomes and businesses.  More QE would weaken the exchange rate further, and the benefits to exports are likely to be more than offset by the negative impact of higher inflation. -The MPC should do more to support a revival in business lending, both by making better use of the existing QE programme and by using measures other than QE alone.  The BCC believes the creation of a fully fledged British Business Bank is the most effective way of securing an increase in lending to business.