Demand for £50bn of QE this week

BUSINESS leaders have today called for a further £50 billion to be pumped into the UK economy as fears grow of a new year recession.

Bank of England policymakers are widely expected to this week hold their programme of quantitative easing at £275bn. Interest rates are likely to be frozen for the 33rd month in a row, at 0.5 per cent.

However, the British Chambers of Commerce (BCC) today warned of a worsening economic backdrop and argued for immediate action from the central bank at Thursday’s rate-setting meeting.

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The business group pointed to last week’s drastic downgrading of the nation’s growth prospects for this year and next, government deficit cuts and the ongoing woes in the Eurozone.

“In the face of these challenges, there is a strong case for the Monetary Policy Committee [MPC] to announce a further £50bn increase in the QE programme this week to £325bn,” said David Kern, chief economist at the BCC.

“But higher QE on its own will not achieve its full potential to support growth without effective measures to improve the flow of credit to businesses,” he added.

The BCC, which claims to speak for more than 100,000 businesses, also appealed to the UK government to make a “determined effort” to accelerate the introduction of credit-easing measures which were unveiled by Chancellor George Osborne in last week’s Autumn Statement.

Most economists and pundits expect the MPC to wait until at least January before it embarks on further asset purchasing under the quantitative easing scheme.

Howard Archer, chief UK and European economist at IHS Global Insight, the forecasting group, said December’s MPC meeting was “unlikely to result in any early Christmas presents for the needy UK economy”.

He added: “We expect the Bank to enact a further £50bn of quantitative easing in both the first and second quarters of 2012, taking the total up to £375bn.

“Furthermore, it is highly possible that it could take the stock of QE even higher than £375bn.”