Bank Of England May Print More Money In 2012

Bank Of England May Print More Money In 2012

The Bank of England has not ruled out more quantitative easing (QE) in the New Year, the minutes of its monetary policy committee (MPC) meeting show.

The bank's policymakers remain concerned that the economic recovery is slow, and believe that more stimulus will be needed to prevent it from slipping back into recession. The institution's inflation report in November downgraded its forecasts for economic growth to below 1% for both 2011 and 2012, and warned that further turmoil in the eurozone posed a serious risk to the economy.

On Tuesday, Moody's, the rating agency, warned that the UK was not immune to the European sovereign debt crisis, and said that the country's Aaa rating was at risk.

In an interview with the BBC, Charlie Bean, a member of the MPC, said that the bank was making contingencies for the event of a eurozone break-up.

QE involves printing money to buy government debt from financial institutions, in theory freeing up capital for them to lend into the real economy - to businesses and consumers. The Bank of England's "asset purchase programme" currently stands at £275bn, after it announced an additional £75bn in October.

The MPC minutes show that the bank is willing to continue with the programme.

"Some members continued to note that the balance of risks to inflation in the November inflation report projections meant that a further expansion of the asset purchases programme might well become warranted in due course," the minutes said.

With the government locked into strict cutbacks as part of its policy of reducing the budget deficit, the Bank of England is the only institution with the power to stimulate the economy with a meaningful quantity of money.

At IHS Global Insight, UK and European chief economist Howard Archer said that the minutes showed that more QE was imminent, probably in February.

"We strongly expect the Bank of England to announce a further £50 billion of QE in February, and believe that a further £50 billion portion is highly likely to follow in the second quarter (most probably May)," he wrote in a note to clients. "This would take the stock up to £375 billion. Furthermore, it is highly possible that the Bank of England could ultimately take the stock of QE even higher than £375 billion."

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