Bank worried about confusion on policy

Amid concerns that the Bank of England may soon introduce "negative interest rates", the deputy governor, Charles Bean, will today convene a meeting of City economists to explain the policy of quantitative easing. The Bank's chief economist, Spencer Dale, and the executive director for markets, Paul Fisher will also attend.

While the Bank regularly holds seminars on policy, this meeting is not routine, and seems to have been prompted by Bank concerns that QE suffers from misunderstandings which have undermined its credibility.

Worries about QE and "negative rates" have helped push sterling down by about 10 per cent against the dollar and the euro in the past fortnight.

Speculation that the Bank may introduce some sort of penalty on "excess" reserves held by the commercial banks at the Bank was also fuelled by a visit by the Governor, Mervyn King, to the Riksbank, Sweden's central bank, last week. The Riksbank has pioneered such an approach. Mr King told the Treasury Select Committee recently that he was thinking about some sort of levy on "excess reserves".

Definitive figures on property prices suggest that QE has not yet transformed conditions in the housing market. The Land Registry reports that house prices slipped by 0.1 per cent in August, having seen their largest month-on-month increase for five years in July, of 1.7per cent, in a thin market.