Belfast Telegraph

New round of quantitative easing 'unlikely'

The Bank of England will leave its money-boosting efforts on hold this week as the economy continues to show signs of recovery and inflation remains high.

The Monetary Policy Committee (MPC) is not expected to embark on a new round of quantitative easing, or QE2, when it announces the results of its two-day meeting on Thursday.

Although the economic recovery appears to have lost some steam since the summer, GDP growth of 0.8% in the third quarter was still better than expected, and by no means weak enough to prompt further action by the MPC.

Economists have also pointed out that the latest round of economic data and survey evidence generally suggest growth will be reasonable in the fourth quarter.

At the same time, inflation remains stubbornly high, running well above the bank's 2% target at 3.2% in October, and this is seen as a major barrier to further increasing the money supply.

The tone of the bank's recent Quarterly Inflation Report suggested further money-boosting efforts were unlikely in the near-term, although it is thought to have left the door open for more quantitative easing next year.

Philip Shaw, an economist at Investec Securities, said: "Although the committee still believes, as we do, that inflation will fall back below target early in 2012, it also recognises that it may rise above 3.5% early next year.

"The risk here is that providing further stimulus could force up medium-term inflation expectations. Hence the MPC would probably push the QE button again only if it became seriously concerned that the recovery was running aground."