Helen Nadin
The Bank of England’s decision to extend quantitative easing by £50 billion (taking the total value of the QE programme to £325 billion) is welcome, providing further stimulus to our stagnating economy. Particularly in the absence of any significant Government stimulus measures, using monetary policy to prevent a second credit crunch and keep long-term borrowing costs low, therefore boosting activity in the rest of the economy, is currently one of the most significant interventions available to support us back to growth.
But QE is far from perfect as a means to support the recovery, with increasing evidence that bank lending remains depressed despite the additional balance sheet boost that QE is providing. This has led many, including Monetary Policy Member Dr Adam Posen, to call for a new type of QE to be developed, which would involve the Bank of England providing direct support to small and medium sized businesses, rather than, as is currently the case, buying Government bonds directly from banks and large financial institutions. And, with no economists entirely sure what the effects of the intervention are, there is also increasing evidence that while QE has boosted confidence and growth it may in the process have pushed up inflation (by boosting demand for assets which would not otherwise have been so highly priced) which would affect those who are already the poorest the most.
Nigel Stanley
Janet Williamson