Businesses urge Bank of England to extend QE programme

The Bank of England should extend its programme of Quantitative Easing (QE) to a massive £200 billion, business leaders suggested this week.

The call for the extension came following the Bank of England's decision to keep interest rates at 0.5% for the seventh consecutive month. While this decision was widely expected by businesses across the UK, some believe that more needs to be done to aid the UK's economic recovery.

QE is the process whereby the central bank purchases financial assets such as Government and corporate bonds using money that it has created in order to stimulate the economy. So far £175 billion has been allocated to the Programme - up on the original £150 billion that was planned.

Commenting on the Bank's latest announcement, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said:

 "There is worrying evidence that earlier hopeful signs of improvement in the economy are weakening. To counter serious risks of relapse, we urge the MPC to raise the QE programme to £200 billion.

"Persistent weakness in lending to companies, particularly to small businesses, is a serious risk that the MPC must address. To unblock impediments to lending, the MPC should cut the interest rate paid on deposits kept by commercial banks at the Bank of England, and make this rate temporarily negative. This would discourage hoarding of cash and encourage banks to lend."

13/10/09