Commenting ahead of the MPC decision tomorrow (Thursday), David Kern, Chief Economist at the British Chambers of Commerce (BCC), said:
“The financial markets are almost unanimous in expecting no change at the MPC meeting, with interest rates being kept at 0.5% and the Quantitative Easing (QE) programme at £325bn. However, two committee members voted at the last meeting for an increase in QE to £350bn, and we’ll be interested to see whether support for such a move would gather momentum. Although we have supported previous increases in QE, we feel that a further £25bn would be unnecessary as it would only have a marginal effect. There is ample liquidity in the financial system and there is no need to drive down yields on government bonds further.
“The main aim should be supporting real economic growth, by encouraging increased lending to viable businesses and making the new credit easing scheme more substantial. But the MPC should also reconsider its reluctance to include assets other than gilts, such as securitised SME loans, in the QE programme. This will make the banks less risk averse, and will help improve the flow of lending to credit-worthy firms.”
