The Bank of England has dropped a heavy hint that it is ready to restart quantitative easing this summer if the economy continues to falter.
Minutes to the Bank of England’s Monetary Policy Committee showed that “several members” of the nine-strong group believed the decision was “finely balanced”.
The minutes were released before deputy governor Charlie Bean told the National Association of Pension Funds (NAPF): “If conditions do deteriorate significantly, we may need to restart the programme.”
Economists said the language was designed to prepare markets for more QE imminently, particularly after the 2.3pc slump in retail sales in April – the weakest performance in two years – and the 0.2pc fall in first-quarter GDP, which the ONS is expected to reconfirm today.
HSBC’s Simon Wells said he continued to “expect another £50bn this year” on top of the £325bn already completed.
The Bank’s message followed the International Monetary Fund’s call for urgent monetary stimulus to return Britain to growth, including more QE and a potential interest rate cut.
The minutes showed the committee did not discuss cutting rates below their record 0.5pc low. David Miles was the lone voice in favour of more QE, voting for another £25bn, but economists said the minutes showed at least two others were poised to move.
The Bank has come under fire over QE from retirement groups, who claim it is impoverishing pensioners and crippling final-salary schemes.
Addressing the NAPF, Mr Bean defended the Bank’s position, saying QE’s effects were “often exaggerated” and that companies should bear some of the blame for failing to close their deficits before the crisis struck.
He argued that Britain’s safe-haven status had also “exerted downward pressure on gilt yields”, which drive investment returns.
At the same time, he said QE had boosted assets such as shares, increasing wealth and the value of investments used to buy annuities.
He also presented analysis showing that “QE does not inherently raise pension deficits”. If a fund was already in deficit, it made the situation worse, he said, but if it was in surplus, it made the position better.
telegraph.co.uk
Minutes to the Bank of England’s Monetary Policy Committee showed that “several members” of the nine-strong group believed the decision was “finely balanced”.
The minutes were released before deputy governor Charlie Bean told the National Association of Pension Funds (NAPF): “If conditions do deteriorate significantly, we may need to restart the programme.”
Economists said the language was designed to prepare markets for more QE imminently, particularly after the 2.3pc slump in retail sales in April – the weakest performance in two years – and the 0.2pc fall in first-quarter GDP, which the ONS is expected to reconfirm today.
HSBC’s Simon Wells said he continued to “expect another £50bn this year” on top of the £325bn already completed.
The Bank’s message followed the International Monetary Fund’s call for urgent monetary stimulus to return Britain to growth, including more QE and a potential interest rate cut.
The minutes showed the committee did not discuss cutting rates below their record 0.5pc low. David Miles was the lone voice in favour of more QE, voting for another £25bn, but economists said the minutes showed at least two others were poised to move.
The Bank has come under fire over QE from retirement groups, who claim it is impoverishing pensioners and crippling final-salary schemes.
Addressing the NAPF, Mr Bean defended the Bank’s position, saying QE’s effects were “often exaggerated” and that companies should bear some of the blame for failing to close their deficits before the crisis struck.
He argued that Britain’s safe-haven status had also “exerted downward pressure on gilt yields”, which drive investment returns.
At the same time, he said QE had boosted assets such as shares, increasing wealth and the value of investments used to buy annuities.
He also presented analysis showing that “QE does not inherently raise pension deficits”. If a fund was already in deficit, it made the situation worse, he said, but if it was in surplus, it made the position better.
telegraph.co.uk
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