Commenting on the decision by the Bank of England’s Monetary Policy Committee to keep interest rates on hold and expand quantitative easing, Suren Thiru, Head of Economics of the British Chambers of Commerce (BCC), said:
The Bank of England’s decision to significantly expand quantitative easing reflects the unprecedented impact of coronavirus on the UK economy. It is vital that the Bank works with financial institutions to ensure that it translates into on the ground support for businesses.
With economic conditions likely to remain challenging in the near term, further easing remains likely. However, with interest rates already at an historical low, extra loosening of monetary policy is unlikely to provide a significant boost to the economy. The central bank has rightly decided against moving interest rates into the negative, which risks doing more harm than good.
The focus instead should be on delivering a fiscal environment that limits economic scarring and helps kickstart a recovery. This should include taking steps to close the remaining gaps in government support, including giving businesses with direct incentives to invest and hire, and stimulating consumer demand through a temporary, but significant cut in VAT.
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