Belfast Telegraph

Bank of England opts to end QE

By Kelly McNamara

Further economy-boosting measures were put on hold after the Bank of England opted not to extend its quantitative easing scheme yesterday.

The Bank has so far pumped £200bn in newly-created money into the economy after finishing its latest round of assistance last week.

The wait-and-see approach from policymakers also saw interest rates held at 0.5% — continuing almost a year of record low borrowing costs.

Experts had widely predicted a no-change position from the nine-strong monetary policy committee (MPC) after a surprisingly weak climb out of recession in the final quarter of last year tested resolve.

Joanne Stuart, Northern Ireland chair of the Institute of Directors, said: “The MPC is engaged in a difficult juggling act. On the one hand anaemic GDP and money supply figures argue that quantitative easing should be extended, but on the other hand the increase in inflation has exceeded expectations and suggests a need for caution.

“Our view remains that until money supply growth strengthens, further, sustainable recovery will be in doubt, particularly for the Northern Ireland economy which relies strongly on a public sector facing increasingly harsh spending restraints.”

The UK's longest period of decline ended with growth of just 0.1% in the last three months of 2009.

Richard Ramsey, Ulster Bank chief economist, said: “In our view the Bank is unlikely to extend quantative easing beyond the current limit. Furthermore, we expect the MPC to begin raising rates in the third quarter of 2010. However, the weaker than expected economic growth profile, if it continues, raises the possibility that such a move will come later (the fourth quarter).”

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