Commenting on today’s decision from the Bank of England Monetary Policy Committee to maintain the Bank Rate at 0.5% and increase the size of the Asset Purchase Programme by £50 billion to £325 billion, KPMG Chief Economist, Andrew Smith, said:
“While expected, today’s announcement underlines how worried the MPC is. Not deterred by slightly stronger recent data, the committee is clearly concerned about the underlying weakness of the economy. Output has been broadly flat for eighteen months and remains some 4% below its pre-recession peak. Slack in the economy should see headline inflation plummet later in the year.
“Like most things in life, QE is probably subject to the law of diminishing returns and additional asset purchases may not be as effective as earlier ones. Nevertheless, a further extension of the programme is likely. With more austerity measures, by way of spending cuts, on the way and interest rates already at a low, there are few other options available to support demand.”
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Notes to editors:
KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with over 11,000 partners and staff. The UK firm recorded a turnover of £1.7 billion in the year ended September 2011. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 152 countries and have 145,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG International provides no client services.