By Claire West

Commenting on the Monetary Policy Committee (MPC) minutes, published yesterday (Wednesday) by the Bank of England, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said:

"As expected, the MPC voted unanimously to hold interest rates at 0.5%, although the minutes reveal that the decision to maintain the QE programme at £375bn was taken by a majority of 8:1.

Until recently, many had anticipated that the Bank would increase QE, so we welcome the shift in opinion. However the minutes show that the Committee remains divided about the value of increasing QE in the future, and such a move cannot be excluded, but should not be considered unless new threats to the stability of the UK banking system emerge. We believe that more QE would increase longer term risks of bubbles, financial distortions, and higher inflation, while only marginally benefiting the UK economy. The increase in CPI inflation to 2.7% in October strengthens our view in the case against adding to QE. Increasing inflation as a result of more QE could have potential adverse effects on economic growth.

“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. If the MPC agrees to purchase private sector assets other than gilts, such as securitized SME loans, banks would be less risk-averse in lending to businesses. Efforts must be made to ensure that the Funding for Lending scheme works more effectively, and the government’s promise to establish a fully-fledged British Business Bank should be acted upon without delay.”