UK business representatives are hoping that an additional £50 billion worth of quantitative easing will be announced today as the Bank of England monetary policy committee meets today.
The Institute of Directors asserts that further money creation is needed to boost bank lending and warns that there could be dire consequences for both the economy and the government’s finances if there is no extension to the current programme of quantitative easing, which is worth £200 billion.
These warnings come in the wake of a slowdown in many areas of UK business over the summer and predictions for economic growth which seem to be consistently weakening as the year goes on. This has led many economists and business leaders to fear that the country is on the brink of further recession.
The Institute of Directors chief economist, Graeme Leach said “The time to launch QE2 has arrived,. The economic risks are sufficiently great to warrant an extension now, in order to avoid sinking into a double dip recession. The hit to business and consumer confidence over the summer could have dire fiscal consequences. Expanding quantitative easing by £50bn initially is a sensible and limited response.”
Several members of the Bank of England’s monetary policy committee have indicated a willingness to consider the idea, which is expected to be discussed at today’s meeting. Business leaders are demanding a monetary response following Chancellor George Osborne’s announcement of yet another downgrade of his economic growth forecast without any plans to change government tax and spending plans.
A report published by the Work Foundation accused the Chancellor of abdicating his responsibilities and leaving economic policy to central bankers and private businessmen and recommended a government directed 15 year plan as the best way to get our economy back on track.
Will Hutton, director of the Work Foundation said: “The state must take the lead on this because confidence among businesses is so fragile at the moment. The Government has recognised the importance of this agenda, but now is the time to make it happen.”
“The private sector cannot shoulder the unknowable risks associated with rebasing the entire economy, nor develop the appropriate foundations and networks alone. We need the ongoing engagement of an enterprising state, Britain needs to own the agenda and think big.”