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Another round of QE forecast for February

February is being tipped as the month when the Bank of England’s Monetary Policy Committee will embark on another round of quantitative easing.

Last week the MPC voted to maintain the asset purchase programme at £275bn. It last increased its QE programme in October 2011, by £75bn to £275bn.

A report from Capital Economics last week said the MPC’s decision to leave policy unchanged until now was expected, given that the last of the £75bn of asset purchases is still being completed.

The report says: “Next month should see the committee announce a further round of QE, which we think will take it further towards eventually increasing the programme to some £500bn.”

It expects that by February the MPC will have compiled its new forecasts for February’s inflation report and it will have the first estimate of Q4 GDP to look at.

The report adds: “The consensus forecast is also for more QE in February, although forecasters are split between anticipating £50bn and £75bn. We think that £75bn is more likely as this would come closer to continuing the current rate of asset purchases.”

The MPC also voted to keep interest rates on hold at 0.5% for the 34th consecutive month last week.

Jonathan Samuels, chief executive officer of Dragonfly Property Finance, says rates were only ever going to be left on hold given the dire state of the economy.

He adds: “While the single biggest support of the property market in recent years has been low interest rates, over time they could prove to be its undoing as inflation embeds above target.

“There’s a point when cheap money becomes the disease, rather than the cure.”

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