David Prosser: What impact does QE really have?

Outlook What will the Bank of England's Monetary Policy Committee decide about its programme of quantitative easing today? This week's money supply figures, which showed only a tiny increase in the rate of growth in the yardstick of supply the Bank says is its key QE reference policy, prompted calls for a resumption of asset purchases.

However, the MPC might just as well take the figures as a cue to reach the same conclusion as they did at last month's meeting, when its members opted not to spend the remaining £25bn of the £150bn they have available for QE, let alone to ask the Chancellor to grant them the right to expand the programme.

After all, if £125bn worth of asset purchases hasn't shifted the money supply upwards, is another £25bn going to do the trick? In which case, the MPC might be wise to sit tight.

Last month, the committee wondered out loud whether much of the QE cash had gone on bank equity and debt issuance, or on corporate deleveraging. Either might encourage more bank lending in time, but not necessarily just yet and possibly for several more months.

Either way, for now at least, the UK economy seems to be plateauing at least. Given those money supply figures, it's difficult to credit QE with that success, though it may yet have a more positive effect in the future.

Interest rates will, of course, remain at these historically low levels for some time to come – probably well into next year – but given all the nervous talk about when best to unwind the potentially inflationary QE programme, it doesn't make much sense to expand it if you're not convinced it is in any case having the desired effect.