What the economists think of the Quantitive Easing programme

The quantitative easing scheme is something that the government has been relying on to help pull the UK out of recession over the course of this year, but although the scheme has been extended on a number of occasions there are mixed reactions from industry officials with regards to just how well – if at all – this programme is working in terms of improvement to the economy.

Following the most recent QE extension one industry expert said: “We suspect this will mark the last stimulus effort from the BoE with the next move being rate hikes, possibly starting in August after the BoE has assessed the impact from any potential fiscal policy changes in the wake of next year’s election. We suggest rates may be raised a little more quickly that the market is pricing, but that the eventual peak will be relatively low at around 4% given a much tighter fiscal environment and the ongoing consumer headwinds of unemployment and deleveraging.”

One economist stated: “The November announcement was in line with our expectations. The £25bn increase amounts to asset purchases of £8bn a month, which is significantly below the latest monthly average of £17bn. That suggests that the Bank of England’s quantitative easing programme is indeed coming to an end. The Bank of England’s focus is going to move away from delivering more quantitative easing into the economy and towards maintaining ample policy stimulus for a long period of time. What they’re saying in today’s statement is that a high level of spare capacity in the economy means that a shift towards a tightening bias is a long way off, even if the economy emerges from recession in Q4 09.”

Another added: “The slower pace of purchases reflects that the committee has put weight on indicators suggesting that activity will soon pickup. We think that the move to slow the pace of purchases was probably also desirable because it means that the programme will taper off gradually over the coming months, which should help to reduce any resulting volatility in the gilt market. We think that this is the last installment of the QE, reflecting our view that a significant economic recovery will take shape in the coming months.”

Tags: policy, statement, number, Fiscal policy, stimulus effort, Quantitive Easing