By Daniel Hunter
The Monetary Policy Committee (MPC) meet this Thursday for their May meeting, with many analysts expecting no changes to the interest rate or quantitative easing (QE).
David Kern, Chief Economist at the British Chambers of Commerce (BCC), is one of those believing that this would be the most prudent approach to take.
“Most analysts expect the MPC to make no changes this month, holding interest rates at 0.5% and the Quantitative Easing (QE) programme at £375 billion," he said.
"We believe this would be the most prudent approach. However three MPC members have voted for an increase in QE in recent months, and following moves by central banks in Japan and the US to increase their QE programmes, the MPC could find itself under pressure to increase the QE programme in the UK.
“In our view adding to QE would provide only marginal benefits for the UK economy, while increasing risks of higher inflation and the further weakening of sterling. UK inflation is already higher than in other major economies and we have to be very cautious of unintended consequences. The MPC should instead view Thursday’s meeting as an opportunity to make better use of the existing QE programme to support a revival of business lending.”
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