Broadbent fuels expectations of further QE this autumn


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Signs that the Bank of England is gearing up for another round of quantitative easing were reinforced yesterday when one of its senior policymakers said he had come "reasonably close" to backing the policy earlier this month.

Ben Broadbent, who sits on the Bank's interest rate-setting Monetary Policy Committee, added that another cash injection into the economy "would help, and it might help the banking system by boosting nominal growth". The minutes of the September MPC meeting, published last week, show that while only one member voted for the move, most were moving towards sanctioning another dose of quantitative easing, the policy of buying financial assets to inject money into the economy.

In comments following his first public speech since he joined the MPC this year, Mr Broadbent, a former economist at the US investment bank Goldman Sachs, said: "I can tell you I was reasonably close, so I don't think it would take much more of a deterioration. It depends exactly what you mean by deterioration. Some of these surveys, particularly of output in the eurozone, are consistent with there being [minimal] growth."

The weak economic backdrop, coupled with the signals from the Bank, have stoked expectations that the policy could be revived as early as the next MPC meeting, in October, or in November.

In his speech, Mr Broadbent noted that the "international environment is clearly disinflationary" and said factors such as "slow growth in the United States, the sovereign debt crisis in the eurozone and its knock-on effects on the cost of finance for UK and European banks" threatened "a further tightening in retail credit and a further slowing in domestic activity".

Responding to the speech and subsequent comments, Howard Archer, the chief European and UK economist at the forecaster IHS Global Insight, said he expected the Bank to pump another £50bn into the economy by November, expanding the stock of the quantitative easing programme to £250bn since it began buying assets in March 2009.

"While we currently favour a move in November, it is very possible that the Bank could act at the conclusion of 5-6 October Monetary Policy Committee meeting if UK data over the next couple of weeks show further weakness and the global economic environment fails to show any signs of improvement," he explained.