QE Increase And Rate Hold Welcomed

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Commenting on today’s decision by the Bank of England’s Monetary Policy Committee (MPC) to hold interest rates at 0.5% for October and increase the UK’s Quantitative Easing programme to £275m, Scott Knowles, Deputy Chief Executive of the Derbyshire and Nottinghamshire Chamber of Commerce, said:

“Against the current backdrop of slow growth and a fragile economy in the UK and continued uncertainty in the international markets, today’s rate hold is welcome. What businesses need at the moment is certainty and stability and one way of giving them that is by keeping interest rates low for a prolonged period, until the recovery has picked up enough momentum to sustain itself longer term, so that firms can plan ahead and invest with confidence.

“With regard to QE, in the face of the risks to the UK’s recovery, it is important to make every effort to underpin business confidence and avoid a setback. Higher QE on its own will not be enough and the Government and Bank of England need to look at other ways to boost growth and get the economy moving again.

“The Chancellor’s announcement earlier this week to introduce credit easing methods to help stimulate the flow of credit in the economy is welcome in principle, but he needs to provide full details of how this scheme will work and its expected timeframe for implementation so businesses can plan accordingly, as it is unlikely to have any effect in the short-to-medium term.

“There is also be a case for action to stimulate stronger bank lending. Regulators should consider temporarily relaxing bank capital requirements to promote the availability of credit to viable businesses that want to invest.

“Future growth continue to be constrained by the consequences of the credit bubble and the banking crisis. Although the policy options available are limited, the key decision makers authorities must focus on policies that will enhance the economy's growth potential and enable the UK to regain the productivity losses incurred during the recession.”