The Bank of England increase stimulus for the economy

The Bank of England increase stimulus for the economy

13:40 PM, 5th July 2012, About 12 years ago

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In today’s Monetary Policy Committee meeting The Bank of England have decided to increase the stimulus into the economy on top of recently announced plans.

The Bank Base Rate will remain at 0.5% where it has been for the last three years and the Bank of England will try to pump more liquidity into the system increasing Quantitative Easing by £50bn with the total now standing at £375bn since the start of the recession.

What is interesting for anyone in the Property industry is that this comes on top of plans to directly offer cheap credit to UK Banking on the proviso that it is used for lending back into the economy and not just sucked up into recapitalising their position.

From an outside perspective Quantitative Easing (QE) does not seemed to have had a great effect, but where would we have been without it. Buying back government Bonds will have admittedly released money back to overseas investors and also had an effect in devaluing the pound and raising inflation. However, it would also have increased liquidity for UK banks who have been desperate to recapitalise and allowed them to lend at the levels they have, but also assisted in reducing the costs of our goods and services abroad helping the overall GDP figures.

I believe the economy is a lot like the natural environment where you cannot introduce a positive effect in one area without causing a negative effect in another. It may be difficult to see, and hidden in layers, but QE must be having some effect and it is the balance and type of stimulus you inject that is the very difficult balance to make. Lets just hope it is not like Cane Toads in Australia and ends up unravelling to far causing uncontrolled inflation in years to come.

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