In These New Times

The inevitable will happen: here comes the next bailout of the banks, euphemistically described as “quantitative easing”. Prepare for further falls in the value of the pound with attendant inflation leading eventually to a raise in interest rates and mortgage rates. Attempts to offload the crisis onto the euro zone will probably fail given emerging economies support for euro. The disastrous and reckless war against Libya only adds to our disarray. The British people can only save themselves by moving to stop the wars and stop the bailouts which finance them.

Bank of England minutes indicate more quantitative easing on the cards

Guardian

22nd September, 2011

The Bank of England appears almost certain to expand its economic stimulus programme before Christmas, in an attempt to prevent the UK economy worsening.

Minutes from this month’s meeting of the Bank’s monetary policy committee, published on Wednesday, showed that the MPC moved closer to extending its £200bn quantitative easing programme. Although the committee held back, most economists believe the asset purchasing scheme will be increased within the next few months.

“For some members, a continuation of the conditions seen over the past month would probably be sufficient to justify an expansion of the asset purchase programme at a subsequent meeting,” said the minutes, sending the pound to its lowest level against the US dollar since since mid-January.

Samuel Tombs, UK economist at Capital Economics, said the minutes “strongly suggest that QE2 is set to be launched in the very near future”.

The minutes revealed that the committee had considered cutting UKinterest rates to a level below their current record low of 0.5%, or changing the mix of short-dated and long-dated bonds held in the QE scheme. However, neither option was judged to be preferable to a policy of further asset purchases, if further policy loosening is required.

In the event, only Adam Posen voted for a £50bn QE expansion. All nine members of the MPC voted to leave rates unchanged.

A poll of City economists conducted by Reuters found there was a 75% chance of the Bank expanding QE, probably at its meeting in November. Eventually the QE budget will reach £300bn, the poll found.

Alan Clarke, economist at Scotia Bank, said the minutes showed that two or thee MPC members were eager to resume asset purchases very soon. “The macro outlook is deteriorating so it is looking more and more like a case of when and not if,” Clarke said.

JP Morgan’s Malcolm Barr was surprised Posen was not supported by other MPC members at September’s meeting. The US academic has been a lone voice since October 2010 in calling for a QE expansion.

Earlier this week, the bank argued that the QE programme had prevented a double-dip recession, boosting GDP by up to 2%.