The Bank of England has been criticised for failing to grasp the opportunity to inject a further £25bn into the economy today.
Economists were expecting an extension of the government’s programme of quantitative easing, effectively printing money to buy corporate and government bonds, from £125bn to £150bn today – the maximum amount that has been sanctioned by the Treasury.
However, the Bank’s Monetary Policy Committee (MPC) instead voted to keep the programme at its current level, as well as keeping the interest rate on hold at its historic low of 0.5%.
Quantitative easing was first introduced in March when £75bn was pumped into the economy in a bid to stimulate bank lending. This was subsequently increased by £50bn in May.
Commenting on today’s decision, David Kern, chief economist at the British Chambers of Commerce (BCC), said: “We disagree with the decision not to use the final £25bn allotted to the asset purchase programme. Quantitative easing is not yet fully effective and there is a strong case for raising the proportion of private sector assets that the MPC purchases.”
Kern also called upon the government to step things up even further.
He added: “It is important to significantly increase the programme’s size, so as to underpin business confidence. We urge the chancellor to increase the ceiling for the programme by a further £50bn, to £200bn.”
The MPC suggested that it would take at least another month for the action already taken to have an effect and pledged to review the scale of the programme again in August.
© Crimson Business Ltd. 2009