By Marcus Leach
David Kern, Chief Economist at the British Chambers of Commerce (BCC) has said that fading pressure for more quantitative easing (QE) is positive news for the economy.
His comments come following Sir Mervyn King's last Monetary Policy Committee meeting, where hardly surprisingly interest rates were held at 0.5%, with no further stimulus for the economy.
“Fairly positive news surrounding the economy in recent weeks, including relatively strong PMI figures for May across all UK sectors, means that earlier pressures for more QE have eased," Kern said.
"The markets no longer expect an early increase, which is a positive development as we believe this would heighten risks of higher inflation and bubbles in the future. Instead, incoming Governor Mark Carney should make better use of the existing QE programme, while using measures other than QE alone to support a revival in business lending.
“If the MPC agrees to purchase private sector assets other than gilts, such as securitised SME loans, it could make banks less risk-averse in lending to businesses. Since UK banks are still weak, and the regulatory burden on them is likely to increase further, creating a British Business Bank is the most effective way to increase the flow of finance to the real economy.”
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