David Prosser: The time for watching and waiting is over: the MPC needs to turn on the taps

 

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.

Start your day with The Independent, sign up for daily news emails
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.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Pricing Analyst

£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K YR1: SThree: At SThree, we like to be dif...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...

Guru Careers: C# Project Team Lead

£55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...

Day In a Page

Why the cost of parenting has become so expensive

Why the cost of parenting has become so expensive

Today's pre-school child costs £35,000, according to Aviva. And that's but the tip of an iceberg, says DJ Taylor
Fifa corruption: The 161-page dossier that exposes the organisation's dark heart

The 161-page dossier that exposes Fifa's dark heart

How did a group of corrupt officials turn football’s governing body into what was, in essence, a criminal enterprise? Chris Green and David Connett reveal all
Mediterranean migrant crisis: 'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves,' says Tripoli PM

Exclusive interview with Tripoli PM Khalifa al-Ghweil

'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves'
Raymond Chandler's Los Angeles: How the author foretold the Californian water crisis

Raymond Chandler's Los Angeles

How the author foretold the Californian water crisis
Chinese artist who posted funny image of President Xi Jinping facing five years in prison as authorities crackdown on dissent in the arts

Art attack

Chinese artist who posted funny image of President Xi Jinping facing five years in prison
Marc Jacobs is putting Cher in the limelight as the face of his latest campaign

Cher is the new face of Marc Jacobs

Alexander Fury explains why designers are turning to august stars to front their lines
Parents of six-year-old who beat leukaemia plan to climb Ben Nevis for cancer charity

'I'm climbing Ben Nevis for my daughter'

Karen Attwood's young daughter Yasmin beat cancer. Now her family is about to take on a new challenge - scaling Ben Nevis to help other children
10 best wedding gift ideas

It's that time of year again... 10 best wedding gift ideas

Forget that fancy toaster, we've gone off-list to find memorable gifts that will last a lifetime
Paul Scholes column: With the Premier League over for another year, here are my end of season awards

Paul Scholes column

With the Premier League over for another year, here are my end of season awards
Heysel disaster 30th anniversary: Liverpool have seen too much tragedy to forget fateful day in Belgium

Liverpool have seen too much tragedy to forget Heysel

Thirty years ago, 39 fans waiting to watch a European Cup final died as a result of a fatal cocktail of circumstances. Ian Herbert looks at how a club dealt with this tragedy
Amir Khan vs Chris Algieri: Khan’s audition for Floyd Mayweather may turn into a no-win situation, says Frank Warren

Khan’s audition for Mayweather may turn into a no-win situation

The Bolton fighter could be damned if he dazzles and damned if he doesn’t against Algieri, the man last seen being decked six times by Pacquiao, says Frank Warren
Blundering Tony Blair quits as Middle East peace envoy – only Israel will miss him

Blundering Blair quits as Middle East peace envoy – only Israel will miss him

For Arabs – and for Britons who lost their loved ones in his shambolic war in Iraq – his appointment was an insult, says Robert Fisk
Fifa corruption arrests: All hail the Feds for riding to football's rescue

Fifa corruption arrests

All hail the Feds for riding to football's rescue, says Ian Herbert
Isis in Syria: The Kurdish enclave still resisting the tyranny of President Assad and militant fighters

The Kurdish enclave still resisting the tyranny of Assad and Isis

In Syrian Kurdish cantons along the Turkish border, the progressive aims of the 2011 uprising are being enacted despite the war. Patrick Cockburn returns to Amuda
How I survived Cambodia's Killing Fields: Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape the US

How I survived Cambodia's Killing Fields

Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape to the US