BCC expects no change to UK monetary policy

Monday 7 January 2013

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The Bank of England's Monetary Policy Committee (MPC) is unlikely to change its approach at January's monthly meeting, it has been claimed.

David Kern, chief economist at the British Chambers of Commerce (BCC), said the nine-member panel is likely to keep interest rates on hold for yet another month at 0.5 per cent.

And the MPC is also expected to freeze quantitative easing (QE) at the current level of £375 billion, he stated.

However, Mr Kern said the next few months will be a period of "considerable uncertainty" for the MPC.

"Although earlier pressures for increasing QE have eased, if growth remains week, it is possible that demands for more QE will intensify," he commented.

"Such a measure should be avoided, as adding to QE would only provide marginal benefits for the economy, while raising the risk of higher inflation."

Mr Kern explained that Mark Carney will take over as the next Bank of England Governor on July 1st, and his appointment has triggered speculation that the UK may move to a new monetary regime.

He said it is important that the transition to a new governor over the next six months does not worsen business uncertainties or paralyse the MPC.

"During this crucial period, the Bank must focus all its attention on ensuring that the Funding for Lending Scheme gets resources through to viable companies, and on shoring up business confidence," Mr Kern stated.

Posted by Steve Williams