What will happen if the quantitative easing program is dropped?
The quantitative easing program introduced by the UK government and the Bank of England saw £200 billion pumped into UK money markets allowing banks and other financial companies access to liquidity in exchange for assets. This has been a very successful program which has increased liquidity in the UK banking arena but as we approach the £200 billion limit placed upon the programme there are concerns as to how the UK economy might react.
There is a feeling that the short-term cost of borrowing in the money markets could increase amid signs that the UK economy may not be as strong as many had assumed. If the cost of borrowing does increase for UK banks and UK financial institutions this will not only restrict liquidity in the business and the consumer marketplaces but would increase the cost of any credit lines which are already available.
While the word from the Bank of England is that the program will end when the £200 billion figure is reached there is a growing suspicion that we may see a short-term increase in the program purely and simply to cover what will be a volatile period just prior to and just after the election. Political motivations aside, there are many who believe this would be the most appropriate course of action which the Bank of England could take.
Share this..
Related stories
UK debt crisis could affect millions
30/12/2013 The number of people using more than half of their disposable income on debt repayments could almost double from 600,000 to 1.1 million by 2018 if interest rates rise to 3% according to the Resolution Foundation. The Resolution Foundation used the latest 5-year growth projections from the Office for Budget Responsibility to make these predictions. Furthermore, the Resolution Found...
Read MoreIs the UK car manufacturing industry finished?
Only last month we saw a 60% slump in the number of cars manufactured in the UK which adds further fuel to the fire of a declining industry over the last few months. Despite a number of attempts to obtain short-term capital injections from the UK government it would appear that the UK car manufacturing and car retail industries have been left to fend for themselves. Despite the fact that these ind...
Read MoreUK markets take a breather after Royal Bank of Scotland news
As we covered yesterday, the Royal Bank of Scotland is rumoured to be in talks about a potential £4 billion rights issue which will assist the company in reducing its exposure to the UK government asset protection scheme. It would appear that this stark reminder that all is not well in the UK financial sector has caught the attention of UK investors today with the UK market taking a downturn afte...
Read MoreUK government leads the way in banking reform
The British Bankers Association (BBA) has today claimed that the UK is leading the way in banking reform in the developed world. Angela Knight, chief executive of the BBA, suggested that while the vast majority of the G20 had discussed and promised significant reform in their local markets, it is the UK which is leading the way at this moment in time.
While there is no doubt that th...