Bank urged to restart UK money-boosting efforts

The Bank of England faced mounting calls today to rekindle its money-boosting efforts ahead of this week's meeting on interest rates.

The Bank's nine-strong Monetary Policy Committee (MPC) is being urged by business groups to launch another phase of its Quantitative Easing (QE) programme to increase the money supply as Britain's recovery falters.

Support for more QE is also increasing within the MPC, with a speech last week by member Adam Posen making it clear he feels now is the time to pump more money into the economy. This followed a clear signal in the minutes of September's rates meeting that so-called QE2 was likely over the coming months.

Economists believe a three-way split will emerge this week, with Mr Posen opting for more QE and Andrew Sentance voting once more for a quarter point rise in rates to calm inflation. But the majority of the MPC is not expected to back any moves yet and experts predict a "no change" decision once again on Thursday.

Vicky Redwood of Capital Economics said: "Slowly but surely the MPC appears to be giving the economy another dose of medicine."

She added it is unlikely "developments over the past months will have been enough to prompt a majority vote for more stimulus this month", but forecasts more QE at the end of 2010 or beginning of 2011.

Howard Archer, chief economist at IHS Global Insight, believes the MPC will want to see the third quarter growth figures due later this month and details of the Government spending review before making a move.

Gross domestic product rose by 1.2% in the second quarter - its fastest pace for nine years - but industry surveys and indicators have since suggested a marked cooling in the recovery.

Manufacturing survey data on Friday from CIPS/Markit showed orders fell in September for the first time this year. The US has also recently signalled willingness to support its slowing recovery with monetary policy action.

Business group the British Chambers of Commerce (BCC) put out a plea for the Bank of England to inject a further £50 billion through QE by the end of the year.

David Kern, chief economist at the BCC, said: "There are worrying signs that the global economy is set to slow and the UK is likely to face major obstacles even before January's VAT rise. We urge the MPC to seriously consider increasing quantitative easing."

The Bank last increased QE in November last year, upping the programme from £25 billion to £200 billion. It has not changed rates for 18 months in a row, keeping them at a historic low of 0.5% - a level that gives the MPC no room to use rates to further help the economy.

Related stories:
Manufacturing growth at 10-month low 
UK inflation fears quelled by factory gate data 
Employment recovery ‘stalled’, says report 
UK government reiterates commitment to manufacturing 

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