By Daniel Hunter
Ahead of the Bank of England interest rate announcement tomorrow (Thursday), Graeme Leach, Chief Economist at the IoD, makes the case for leaving Quantitative Easing (QE) and interest rates unchanged.
“The cocktail of QE and low interest rates has kept spirits reasonably high, but the job of central bankers is to take away the punch bowl before the party has a chance to get out of hand,” he said.
“However, this recovery party is different. A rise in interest rates or a sudden end to QE might cause even more companies and consumers to fall over.
“Also, the weakness of the banking system and more stringent capital requirements means that the cocktail doesn’t taste quite as good as it looks. For the party to get really out of hand we would need to see sustained above trend GDP growth and this looks unlikely at present.”
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