Money growth slows amid 'limited impact' of quantitative easing

More doubts over the Bank of England's £175 billion efforts to aid the economy emerged today after figures showed money growth slowed during August.

The Bank's preferred measure showed money supply growth easing to 0.2 per cent last month, compared with a downwardly-revised 0.4 per cent in July.

Lending also fell by £9.8 billion during August, much weaker than the £1.9 billion fall seen a month earlier.

The downbeat data comes six months into the Bank's unprecedented programme of quantitative easing - pumping billions in newly-created cash into the money supply in an attempt to get the economy moving again.

Today the Bank invited around 40 leading economists to Threadneedle Street for discussions over the impact of the strategy.

"The latest broad money figures suggest that QE is still having a pretty limited impact," Capital Economics' Vicky Redwood said.





The Bank's QE programme is likely to continue until the end of the year, although experts have suggested rate-setters could take further action.

Minutes of recent policy meetings have revealed Governor Mervyn King in favour of an even bigger increase in the scheme to aid the economy, although the majority of the Monetary Policy Committee (MPC) does not yet support such a move.



Today's figures showed "broad money" holdings - bank and building society deposits and cash, known as M4 - in households was up 0.6 per cent month on month.



But lending to households grew by just 0.1 per cent in August and the annual rate of growth slowed to 2.1 per cent.



The money holdings of non-financial businesses fell by 0.1 per cent or £300 million over the month, while the decline in year-on-year lending to businesses deepened to 3.1 per cent.



Colin Ellis, economist with Daiwa Securities, said the figures "suggest there is still more work to do for the MPC" with the UK economy in a "dire state".



"We think the case has been made for the MPC to increase its asset purchases again - although probably not before November."



He added that the Bank seemed more optimistic over the impact of QE but warned of doing too little to shore up the recovery.



"The MPC has already made several errors coming into the recession - and it needs to be careful now not to make further mistakes now the economy is showing signs of life."

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

PROMOTED VIDEO
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Software Development Manager

    £40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

    Ashdown Group: Product Manager - (Product Marketing, Financial Services)

    £30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

    Recruitment Genius: Compliance Assistant

    £13000 per annum: Recruitment Genius: This Pension Specialist was established ...

    Ashdown Group: Market Research Executive

    £23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

    Day In a Page

    As in 1942, Germany must show restraint over Greece

    As in 1942, Germany must show restraint over Greece

    Mussolini tried to warn his ally of the danger of bringing the country to its knees. So should we, says Patrick Cockburn
    Britain's widening poverty gap should be causing outrage at the start of the election campaign

    The short stroll that should be our walk of shame

    Courting the global elite has failed to benefit Britain, as the vast disparity in wealth on display in the capital shows
    Homeless Veterans appeal: The rise of the working poor: when having a job cannot prevent poverty

    Homeless Veterans appeal

    The rise of the working poor: when having a job cannot prevent poverty
    Prince Charles the saviour of the nation? A new book highlights concerns about how political he will be when he eventually becomes king

    Prince Charles the saviour of the nation?

    A new book highlights concerns about how political he will be when he eventually becomes king
    How books can defeat Isis: Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad

    How books can defeat Isis

    Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
    Judith Hackitt: The myths of elf 'n' safety

    Judith Hackitt: The myths of elf 'n' safety

    She may be in charge of minimising our risks of injury, but the chair of the Health and Safety Executive still wants children to be able to hurt themselves
    The open loathing between Barack Obama and Benjamin Netanyahu just got worse

    The open loathing between Obama and Netanyahu just got worse

    The Israeli PM's relationship with the Obama has always been chilly, but going over the President's head on Iran will do him no favours, says Rupert Cornwell
    French chefs get 'le huff' as nation slips down global cuisine rankings

    French chefs get 'le huff' as nation slips down global cuisine rankings

    Fury at British best restaurants survey sees French magazine produce a rival list
    Star choreographer Matthew Bourne gives young carers a chance to perform at Sadler's Wells

    Young carers to make dance debut

    What happened when superstar choreographer Matthew Bourne encouraged 27 teenage carers to think about themselves for once?
    Design Council's 70th anniversary: Four of the most intriguing prototypes from Ones to Watch

    Design Council's 70th anniversary

    Four of the most intriguing prototypes from Ones to Watch
    Dame Harriet Walter: The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment

    Dame Harriet Walter interview

    The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment
    Art should not be a slave to the ideas driving it

    Art should not be a slave to the ideas driving it

    Critics of Tom Stoppard's new play seem to agree that cerebral can never trump character, says DJ Taylor
    Bill Granger recipes: Our chef's winter salads will make you feel energised through February

    Bill Granger's winter salads

    Salads aren't just a bit on the side, says our chef - their crunch, colour and natural goodness are perfect for a midwinter pick-me-up
    England vs Wales: Cool head George Ford ready to put out dragon fire

    George Ford: Cool head ready to put out dragon fire

    No 10’s calmness under pressure will be key for England in Cardiff
    Michael Calvin: Time for Old Firm to put aside bigotry and forge new links

    Michael Calvin's Last Word

    Time for Old Firm to put aside bigotry and forge new links