By Marcus Leach
With the Bank of England's Monetary Policy Committee (MPC) meeting this Thursday there is widespread expectation that they will announce a further round of quantitive easing.
David Kern, Chief Economist at the British Chambers of Commerce (BCC), has called for the MPC to announce the easing this week, rather than waiting another month.
“Worsening problems facing the Eurozone, and worrying signs that the domestic economy is slowing have increased threats to Britain’s fragile recovery," he said.
"To reduce risks of a setback, we believe the MPC should act resolutely. The quantitive easing programme should be increased on Thursday from £200 billion to £250 billion, and the committee should consider more radical methods.
“The additional quantitive easing resources should be primarily used to purchase securitised small business (SME) loans and other private sector assets. In addition, the imposition of negative interest rates on deposits held by commercial banks at the Bank of England could help to boost the availability of credit. Furthermore, the MPC should bolster business confidence by confirming that interest rates will not be raised until the end of 2012, as the Fed has done in the US.
“While implementing some these ideas may cause technical problems for the MPC, these are not insurmountable. Even if success cannot be guaranteed, the MPC must be more proactive. We appreciate that the committee will be concerned by above-target inflation, but the threats to growth are more serious at the present time.”
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