MPC should do more to boost business lending to viable businesses

7th January 2013

Commenting on the choices facing the Monetary Policy Committee (MPC) at its first 2013 meeting next 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 the next few months will be a period of considerable uncertainty for the MPC. Although earlier pressures for increasing QE have eased, if growth remains week, it is possible that demands for more QE will intensify. Such a measure should be avoided, as adding to QE would only provide marginal benefits for the economy, while raising the risk of higher inflation. -Mark Carney takes over as the next Bank of England Governor on 1st July, and his appointment has triggered speculation that the UK may move to a new monetary regime. It is important that the transition to a new Governor over the next six months does not worsen business uncertainties or paralyse the MPC. During this crucial period, the Bank must focus all its attention on ensuring that the Funding for Lending Scheme gets resources through to viable companies, and on shoring up business confidence."

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