Michael Carty
The UK economy emerged from its double-dip recession last week. But a sustained recovery is by no means certain.
Some economic commentators believe that the Bank of England Monetary Policy Committee (MPC) might also announce further quantitative easing at its November 2012 meeting next week (on Thursday 8 November 2012), as part of an effort to promote recovery.
What is quantitative easing?
So what is quantitative easing?
- Quantitative easing has been defined as “the economic term for allowing the Bank of England to print more money.”
- Chancellor George Osborne described quantitative easing as “the last resort of desperate governments when all other policies have failed” while in opposition.
- Quantitative Easing Explained Guidance from the Bank of England website.
The MPC was split on extending quantitative easing in its October 2012 meeting, latest MPC minutes reveal.
The MPC’s November 2012 decision on quantitative easing is likely to be a close call, according to the Independent:
The Bank’s monetary policy committee faces a critical decision in 10 days’ time over whether to expand its quantitative easing programme of money-printing beyond £375bn. The current £50bn round of purchases has expired and the economy – for all the headlines over 1 per cent growth in the July-September quarter – is still flat compared to a year ago. Judging by the evidence so far, this looks like being the tightest decision since June, when the committee split 5-4 in favour of no change.
Capital Economics Chief Economist Vicky Redwood comments:
Overall, it is a close call whether a majority [of MPC members] votes for more QE [in November 2012]. But the fact that at least some members are clearly convinced of the need to do more persuades us to stick with our forecast of a £50bn increase (though a rate cut seems unlikely for now).
The value of the quantitative easing programme is currently £375 billion. An increase of £50 billion would therefore take it to £425 billion.
The possibility of an imminent renewal of quantitative easing reflects the profound and ongoing uncertainty as to whether the UK’s return to growth can be sustained.
See also:
- XpertHR economic commentary October 2012: A lack of oomph XpertHR’s economic commentary for October 2012 report on the following topics: the national minimum wage uprating for 2012/2013; the Government’s new strategy to reboot the UK economy and what might be expected from the Chancellor’s Autumn Statement 2012. We also consider trends in trade union activity in 2012 and beyond, and report the latest readings on key economic indicators of relevance to HR practitioners and pay specialists, including inflation, unemployment and pay awards.
