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
Arts and Entertainment
Ramsay Bolton in Game of Thrones
tvSeries 5, Episode 3 review
News
peoplePair enliven the Emirates bore-draw
Arts and Entertainment
tv
News
Britain's opposition Labour Party leader Ed Miliband (R) and Boris Johnson, mayor of London, talk on the Andrew Marr show in London April 26
General electionAndrew Marr forced to intervene as Boris and Miliband clash on TV
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
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

Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Business Analyst - Financial Services - City, London

£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...

SThree: Trainee Recruitment Consultant

£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

SThree: Trainee Recruitment Consultant

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

Day In a Page

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

How a costume drama became a Sunday night staple
Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

Miliband promises no stamp duty for first-time buyers

Labour leader pushes Tories on housing
Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

Aviation history is littered with grand failures

But what went wrong with the SuperJumbo?
Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

Fortress Europe?

Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
Never mind what you're wearing, it's what you're reclining on

Never mind what you're wearing

It's what you're reclining on that matters
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence