Comment: QE freeze raises questions of its effectiveness

Terry Murden
Terry Murden
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THE Bank of England’s decision not to inject more money into the economy may tell us that it is giving the nascent recovery the benefit of the doubt. It may also be evidence that it is losing faith in quantitative easing as an effective tool.

Analysts argue that QE has boosted equities and weakened the pound, giving a lift to exporters but failing to make any impact on the broader economy.

Some observers have gone further by arguing that QE has caused more problems than it has solved, particularly for savers and pensioners.

The likelihood now is that the Bank’s monetary policy committee, which also kept interest rates unchanged, will measure the effectiveness of the Funding for Lending scheme before deciding on whether to increase the £375 billion of QE, possibly in the first quarter of next year.

Funding for Lending is arguably easier to measure, but its distribution depends largely on how the banks choose to use it. Attention will also be paid to how trading in the eurozone develops. Any further weakening, particularly in Germany, will see sterling rise in value against the euro and erode Britain’s export competitiveness.

Small is beautiful for nation’s beer drinkers

ONE industry that has learned how to reinvent itself is brewing. Where the choice of beers was once limited to the mass-produced and often poor quality products of a handful of corporates, there are now hundreds of so-called microbreweries which collectively add up to a substantial and growing sector of the economy.

They are also branching out into the pub trade. Gerald Michaluk, who has recently merged two breweries on Arran and the Isle of Skye, will open his first pub in Glasgow and is effectively following in the footsteps of others, such as Fraserburgh-based BrewDog, which are also moving into the retail side of the business.

There is a long way to go for these enthusiasts-turned-entrepreneurs to catch the big boys but they create a following among consumers, aided by social media to spread the word about their ales and to raise finance.

Another effect of microbreweries’
growth is that the bigger players have been forced to improve their own products and introduce new ranges that appeal to a more discerning drinker whose thirst for something better has changed an industry.

Banking reform is not automatically a plus

In ITS evidence to the parliamentary commission on banking standards RBS restates its reservations about the proposal to ring-fence retail and investment banking.

RBS warns that it could backfire, hitting customers, and do nothing to change the culture of banks.

There has been a danger throughout the many inquiries that the resulting changes will ultimately prove futile.