MPC SHOULD RESIST PRESSURES TO BOOST QE
May 3 2013.


Commenting on the choices facing the Monetary Policy Committee (MPC) at its May meeting next Thursday, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said:


"Most analysts expect the MPC to make no changes this month, holding interest rates at 0.5% and the Quantitative Easing (QE) programme at £375bn. We believe this would be the most prudent approach. However three MPC members have voted for an increase in QE in recent months, and following moves by central banks in Japan and the US to increase their QE programmes, the MPC could find itself under pressure to increase the QE programme in the UK.

"In our view adding to QE would provide only marginal benefits for the UK economy, while increasing risks of higher inflation and the further weakening of sterling. UK inflation is already higher than in other major economies and we have to be very cautious of unintended consequences. The MPC should instead view Thursday's meeting as an opportunity to make better use of the existing QE programme to support a revival of business lending."