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Bank urged to act 'rapidly' on money supply

The Bank of England needs to act “rapidly” and “forcefully” if the recession is not to deepen.

That was the response of the British Chambers of Commerce (BCC) to the publication of the minutes of the latest meeting of the Bank’s rate-setting Monetary Policy Committee.

David Kern, the BCC’s chief economist, said: “The minutes confirm that the MPC is prepared to continue easing policy, but there is too much hesitancy in their willingness to act rapidly and forcefully.

“There is a critical need for aggressively pursuing quantitative and credit easing. Businesses must be reassured that the MPC and the Bank will move in that direction.”

In the minutes, the Bank conceded that more action than rate cuts was necessary to help stimulate the economy.

The minutes stated: “To the extent that further cuts in bank rate could not inject sufficient stimulus, the committee would need to use alternative policy instruments. There was a great deal of uncertainty about what would happen to banks’ and building societies’ ability and willingness to lend at low levels of interest rates.”

Those alternative policy instruments include quantitative easing which would boost the money supply in the economy and the level of funds in the banking system, so encouraging high street banks to start lending once more.

The Bank, it is believed, could start the process very soon, buying both government and corporate bonds.