Economy set for another 50bn boost as Sir Mervyn King expected to restart printing presses
Cashing in: Sir Mervyn King is expected to restart the printing presses
Sir Mervyn King, Governor of the Bank of England, is expected to restart the printing presses this week and run off at least another 50 billion to hold back the spectre of deep recession.
In what would be the sixth round of quantitative easing, the Bank’s Monetary Policy Committee is likely to take the total of its money-creation programme to a minimum of 325 billion, the equivalent of more than 22 per cent of gross domestic product.
This staggering figure means that for every 1 in 5 that the nation earns, the Bank has conjured 1 out of thin air.
Nothing on this scale has ever been tried in peace time and the long-term consequences are unpredictable. But with GDP estimated to have fallen by 0.2 per cent in the final quarter of last year, and every likelihood that it will do the same in the current quarter, the MPC is expected to act.
Another quarter of negative growth would put Britain back into recession for the first time since the second quarter of 2009, and the Bank would want to stop that from turning into a prolonged downturn.
Rupert Robinson, chief executive at Schroders Private Banking, said: ‘We expect more quantitative easing. My best guess would be for another 50 billion.’
Trevor Williams, chief economist with Lloyds Banking Group, said: ‘I think there will be another round of quantitative easing, and if it is only 50 billion I think we would wonder why it had not been 75 billion.
‘The real economy is no longer contracting, but there has been a fall in the money supply, in consumer credit and in lending to small and medium-sized businesses. There are also the problems in the eurozone.’
Howard Archer, economist with independent forecaster IHS Global Insight, said: ‘It is very much a done deal. I am looking for another 50 billion. We have the risk of contraction during the first quarter of this year. There is a clear case for giving the economy more help.’
Peter Dixon, strategist at Commerzbank, said: ‘We seem to be operating in a improved market environment.’
Last week saw upbeat surveys of purchasing managers, but these are thought unlikely to stay the Bank’s hand.
Under quantitative easing, which began in March 2009, the Bank creates new cash and then buys assets, mainly British Government bonds, from private-sector investors other than banks. It is hoped that this pumps money into the system.
Related posts:
- Will there be more quantitative easing tomorrow? Bank of England expected to hold off on economy boost until February
- Bank Governor Mervyn King warns banks to cut back on bonuses – and boost lending
- Better news on the state of the UK economy is expected this week
- Sir Mervyn King and MPs in clash over Bank of England reforms
- Bank of England holds off on economy boost – but evidence points to more quantitative easing in February