In March 2009, the Bank of England decided to embark on £75 billion worth of Quantitate Easing (QE). At its meeting last month, the Monetary Policy Committee voted unanimously to maintain interest at 0.5 percent and the level of QE at £375 billion.
Monetary policy, control of inflation, and the supply of money is not something under the control of the Government. It is a matter for the independent Bank of England, which has a target inflation rate of 2 per cent. The latest figures that show it is now at 0.2 per cent, which is good news for family budgets and businesses.
In principle, the Monetary Policy Committee (MPC) has always been able to set the Bank Rate at any level, including a rate below zero. There are no significant technical or operational obstacles that would prevent the Bank from implementing a negative interest rate. A reduction in interest rates, including to below zero, remains an option which the MPC will keep under review unless circumstances change in the future.
The Government has consistently argued that the right economic policy should combine fiscal responsibility to tackle the deficit with monetary activism to support the economy in the short term. QE is part of this monetary activism and helps to keep interest rates low and to boost economic growth. The Bank of England estimates that the first £200 billion of QE boosted growth by around 1.5 per cent to 2.0 per cent.
By Patrick McLoughlin on March 09, 2016