Commenting on today’s Monetary Policy Committee (MPC) decision, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said:

“The decision by the MPC to maintain QE at £375bn and hold interest rates at 0.5% was the correct choice. Earlier suggestions that QE would be increased in November have abated recently, and so we welcome this move, as we believe that adding to QE would have been risky and unwise at the present time. Increasing QE should only be considered if new threats emerge to the stability of the UK banking system.

“With yields on gilts at very low levels already, adding to QE would only provide marginal benefits for the real economy, while creating longer-term risks of bubbles, financial distortions, and higher inflation. The prospect that inflation is likely to increase in the near term, and fall less than initially thought next year reinforces arguments against using QE to limit falls in inflation. A fall in inflation would be beneficial, even if the rate moves temporarily below the 2% target. Lower inflation would underpin real incomes and support demand, at a time when UK growth prospects remain very weak.

“To boost growth, the MPC and the government should take more effective steps to support a revival in business lending, both by using the existing QE programme more efficiently, and by using measures other than QE alone. If the MPC agrees to purchase private assets other than gilts, such as securitised SME loans, banks would be less risk-averse in lending to businesses. Efforts must be made to ensure that the Funding for Lending scheme works more effectively, and the government’s promise to establish a fully-fledged British Business Bank should be followed through without delay.”


Notes to editors:

The British Chambers of Commerce (BCC) is the national voice of local business.

The British Chambers of Commerce (BCC) sits at the heart of a powerful nationwide network of 51 Accredited Chambers of Commerce, serving over 104,000 businesses across the UK, which employ over five million people. For more information visit: www.britishchambers.org.uk

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