Bank of England policymaker says he sees scope for greater QE

By MARTIN FLANAGAN
Published on 22/06/2012 00:00

FALLING inflation provides scope for more quantitative easing (QE) to stimulate Britain’s subdued economy, an external member of the Bank of England’s monetary policy committee (MPC) claimed yesterday.

Martin Weale’s comments came after it was revealed earlier this week that the MPC’s June meeting voted 5-4 to freeze QE at current levels of £325 billion.

Weale said recent easing of inflation – to 2.8 per cent in May – meant there was much less risk of inflationary pressures becoming entrenched through increased gilt-buying from banks than had seemed the case a few months ago.

He told the Hart Brown Economic Forum that he believed there was “appreciably more room for further monetary stimulus”, while he also supported the recent funding-for-lending initiative by the Bank and the Treasury to boost banks’ lending.

The rising cost of bank funding had added to the economic squeeze in the UK, he said. “It would be too much to expect that all of this will deliver a calm sea and a prosperous voyage,” Weale added.

“There is only so much that can be expected of monetary policy and that is especially true in the current international environment of high uncertainty. But it will certainly help.”

He added that UK productivity growth remained weak but it was impossible to say whether this was supply or demand- driven.