Bank Slams Brakes on QE amid 'Sluggish Recovery'

The Evening Standard (London, England), February 4, 2010 | Go to article overview

Bank Slams Brakes on QE amid 'Sluggish Recovery'


Byline: Hugo Duncan

THE Bank of England took the dramatic decision to turn off its printing presses today as it called a halt to quantitative easing.

It said it will not pump any more money into the economy, having now injected a staggering [pounds sterling]200 billion to stave off deflation and stop recession turning into depression.

Members of the monetary policy committee also left interest rates at 0.5% while the European Central Bank held rates in the eurozone at 1%.

The jury is out on whether the battered British economy is on the road to a sustained recovery or still reliant on life support. The Bank said economic growth remained "sluggish" -- output rose by just 0.1% in the fourth quarter of 2009 -- and forecast only "a gradual recovery in the level of activity".

It said: "The considerable stimulus from the easing in monetary policy, the lower level of sterling and the recovery in UK export markets should together support domestic activity.

"But credit conditions are likely to remain restrictive, while the need to strengthen public and private-sector finances will also weigh on spending."

Mortgage lender Halifax underlined the fragility of the recovery by reporting a 0.6% rise in house prices in January -- the weakest increase in seven months.

George Buckley of Deutsche Bank said: "The Bank has probably done enough to secure a recovery of sorts. While we think today's pause marks the end of QE, the risk of a double-dip in economic activity means that we can't fully write off the chance of further stimulus just yet. …

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Bank Slams Brakes on QE amid 'Sluggish Recovery'
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