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‘Quantative easing must continue,’ say economists

Jul 10 2009

Economists have criticised the Bank of England’s decision to stall its quantative easing programme.

David Kern, chief economist at the British Chambers of Commerce, says: ‘We disagree with the decision not to use the final £25 billion allotted to the asset purchase programme. It is important to significantly increase the programme’s size, so as to underpin business confidence.’

Roger Bootle, economic adviser to accountancy firm Deloitte, says: ‘Of course, it will take time for the quantative easing already undertaken to help the economy. But the early signs are still far from encouraging. Bank lending growth has continued to slow. And the money holdings of firms and households are rising at a slower rate too. I think that the [MPC] will have to use the last £25 billion of the £150 billion originally sanctioned by the Chancellor.’

Following the Bank’s decision to halt the programme, sterling rose against the dollar yesterday to $1.627. Mark O’Sullivan, director of dealing at Currencies Direct, says the move helped to return short-term confidence in sterling.

Yesterday the MPC also voted to maintain interest rates at 0.5 per for the fourth month in a row. The Bank says it will review the scale of its quantative easing programme again in August, alongside its latest inflation projections.

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