Bank of England set to increase quantitative easing fund by £25 billion
The Bank of England is this week expected to ask the Treasury for permission to increase the limit on the quantitative easing program from £150 billion to £175 billion. It is also expected that the MPC will this week agree to hold UK base rates at 0.5% until we receive further signs of economic recovery and increased demand in the financial markets. However, any request to increase the quantitative easing fund may be taken as a negative by UK investors who have already seen £150 billion pumped into the system.
As we have discussed on numerous occasions, while there is no doubt that quantitative easing is working and injecting further liquidity into the UK financial markets, but the process has been very slow and long winded. Those who expected an immediate improvement in liquidity to consumers and businesses in the UK have been disappointed and even now there is no firm indication as to when liquidity levels will improve in the likes of the loan and mortgage markets.
It seems highly likely that the UK government will approve the potential increase in the quantitative easing fund because another fallout between the Bank of England and the UK Treasury would not go down well in financial markets. We await developments this week with anticipation.
Share this..
Related stories
David Blanchflower attacks Mervyn King
David Blanchflower, the former Bank of England policy maker, has today launched a stinging attack on Mervyn King suggesting that vital information was withheld from other MPC members at the height of the financial crisis. This is by far and away the most damning accusation aimed at Mervyn King and while unsubstantiated at the moment there have been rumours of an overbearing and over controlling cu...
Read MoreGordon Brown defends decision to increase the budget deficit
Gordon Brown has today told a committee of MPs that he was right to increase the budget deficit and government borrowings in order to combat the recession. In a move which places him at the opposite end of the spectrum from the Conservative party, Gordon Brown believes it was "essential" to spend, spend, spend in order to protect jobs and protect businesses. But will it be enough to sway voters in...
Read MoreIs the retail price index fall a help or hindrance?
As we covered in one of our earlier posts, the Retail Price Index (RPI) is still in negative territory and as a consequence we will see Rail season-ticket prices fall across the UK from January 2010. While a negative RPI, which effectively means that prices are falling, is still a good thing for UK consumers it can and will cause havoc in the business arena.
In general terms it is v...
CBI survey reveals difficult retail market ahead
A survey by the CBI has highlighted the troubles of the UK retail sector after a brief period of respite and hope that the worst was over. The survey found that 63% of retailers have seen their sales fall in the first half of March with just 19% reporting an increase. The net balance of retailers expecting to see negative sales growth in the month of March is 44% against forecasts of around 33% on...
Read MoreWhat happens if interest rates fall to 0%?
We have the potentially intriguing situation which could see UK base rates fall to 0% in the short to medium term as the government tries ever harder to refloat the UK economy. But if rates do fall to 0% where does this leave the financial sector? Savers? Mortgage holders?
A fall to 0% is something which has never been seen in the modern era and something which would be a drastic me...