Outlook So will they or won't they? When the nine members of the Monetary Policy Committee arrive at the Bank of England this morning to begin their monthly deliberations, they will know that the case for a renewal of the quantitative easing programme that has been in abeyance since November 2009 is now even stronger. The question is whether October is the month in which the MPC pushes the button.
It is difficult to think of many reasons why they should choose to delay. Last month, only Adam Posen cast his vote for more QE, but the minutes of the September deliberations revealed that several of his colleagues indicated they were close to joining him. Since then, Ben Broadbent, David Miles and Spencer Dale have all dropped heavy hints suggesting that it would not take much to secure their support.
The economic data has certainly deteriorated since last month's meeting. In the past 48 hours alone we have had depressing figures from the construction industry and manufacturing data that bettered expectations but warned of worse times ahead with export orders now stagnating. All the evidence from the rest of the economy in the past few days and weeks has pointed in the same direction.
On inflation, meanwhile, the issue that worries those who are more cautious about QE, the news has been slightly better. August's small rise, from 4.4 per cent to 4.5 per cent, was surprisingly modest given the very sizeable increase in utility bills that was included in the figures. The headline rate of inflation may rise a little further in the months ahead as utility bill increases, as well as the VAT rise and higher fuel costs, continue to contribute. But these will fall away at the beginning of 2012 and it is difficult to see why core inflation, currently stable, should not remain so.
The Chancellor of the Exchequer, for one, is clearly keen for the MPC to take the plunge. His speech to the Conservative Party conference on Monday more or less called for them to do so.
What, then, is the case for delay? Well, one might argue that it would be wise to wait for the quarterly economic growth figures, which will be available for the MPC's scrutiny at their November meeting. Or, if the MPC wanted, it could wait until December, when the Bank will have published its latest Inflation Report. The committee will also, by then, have heard George Osborne's autumn statement – not that they will be holding out much hope for any additional fiscal stimulus from that.
Against that, however, theever-more volatile situation in the eurozone has the potential to pile on the misery before the next MPC meeting. And if the data has been deteriorating in the UK, it has been falling off a cliff across much of the single currency bloc.
It is time for the MPC to be decisive. A few weeks back, the Bank published research suggesting its first round of quantitative easing boosted economic output by as much as 2 percentage points. A second round, at least initially, would not be of the same magnitude, so its impact would be less significant. But with the economy now flatlining, any lift at all is desperately needed.