05/10/10

By Claire West

Over recent months the Institute of Directors (IoD) has consistently argued that weak money supply growth would lead to an expansion in quantitative easing (QE). That time has now come.

Key points:

• The IoD supports a further £50 billion expansion in QE by the Bank of England given the weakness of money supply growth and the recent softening across a range of economic indicators.

• Given the urgent need to tighten fiscal policy through lower public spending, monetary policy needs to help recovery.

Graeme Leach, Chief Economist at the IoD, said:
"Monetary policy needs to help ensure a sustainable recovery is in place before the public sector recession begins. Yes inflation is above target now, but a double-dip recession would raise the spectre of deflation. At the present time the growth threat is more of a danger than inflation."