Business lending slide supports Posen's QE call

ADAM Posen's case for further quantitative easing gained traction yesterday as the latest business lending figures showed a 3 per cent decline in August compared to last year.

The monetary policy committee member shocked the markets on Tuesday when he broke ranks with other Bank of England policymakers and made the case for further money supply.

Although the amount of money extended to non-financial firms in August was up 0.1 per cent compared to July, the year-on-year figures revealed the 3 per cent drop.

The news coincided with the latest data on mortgage lending which revealed the number of home loans approved in August hit a seven-month low. Net consumer lending also touched its weakest level for nine months.

Marc Ostwald, gilts strategist at Monument Securities, said all of yesterday's figures would add further urgency to Posen's demands. "Overall it would tend to favour the Adam Posen camp of opening up the debate on more QE, even though I think doing more would be totally redundant," he said.

Ben Williamson, senior economist at CEBR, said: "The pressure is mounting for the Bank of England to restart its quantitative easing programme in order to counter the threat of a stunted recovery and possible deflation."