Sir Mervyn continues to press for more QE
Sunday 31 March 2013
The Bank of England Governor, Sir Mervyn King, will press again for more aid for the economy this week as Threadneedle Street grapples with conflicting signs over the health of the recovery.
Experts said the Governor –who warned the crisis "was far from over" to an audience of top economists and central bankers at the London School of Economics last week – was likely to maintain his call for the Monetary Policy Committee to pump an extra £25bn into the recovery via quantitative easing.
Sir Mervyn has joined fellow rate-setter David Miles and the Bank's markets director Paul Fisher in calling for the first expansion of QE since last July as the UK seeks to avoid a triple-dip recession. But their efforts have so far been blocked by a majority of the nine-strong committee worried that QE could cause a run on sterling and whether it is even that effective.
ING Bank's James Knightley said: "I suspect we will see the same six-three split. I can't see King backing down but I can't see the other six backing down either. We think they might go again in May. There is still the risk of another negative quarter of growth and the eurozone story is looking grimmer again."
The MPC is attempting to pick its way through a welter of conflicting data as heavy snow complicates the underlying picture. Manufacturing slumped disastrously in January, but the much larger services sector was far more resilient with 0.3 per cent growth. Although the pound has stemmed its sharp decline since the turn of the year, inflation is also set to rise above 3 per cent by the middle of 2013.
Chris Williamson, the chief economist at financial data provider Markit, said: "I think the services data back up the Bank's opinion that the underlying momentum of the economy has been stronger than official figures. I don't think we'll see any more QE unless something calamitous happens in the eurozone."
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