MPC urged to release another £50bn of QE to help companies

BANK of England governor Sir Mervyn King is under pressure from businesses to inject a further £50 billion into the economy this month in an effort to boost confidence.

The British Chambers of Commerce is calling on the Bank’s monetary policy committee to boost quantitative easing (QE) to £325 billion at its meeting this week.

Most economists expect the MPC to hang fire until February, but David Kern, chief economist of the BCC, said an earlier move is needed to raise confidence among businesses, which are reluctant to invest while the economic outlook remains poor.

“Many commentators expect the MPC to wait until February before acting. But we believe that an announcement next week would boost confidence and ease concerns around the fate of the Eurozone,” he said.

However, it is believed that MPC members are concerned that the markets wouldn’t be able to digest another injection at this stage, particularly as October’s £75bn QE extension is not due to complete until early next month.

Some economists believe QE will ultimately hit £500bn as Britain’s economy teeters on the brink of a double-dip recession. Interest rates are not expected to move from 0.5 per cent until 2013 at the earliest.