Quantitative Easing Defended

A Bank of England policymaker has defended the decision to inject further stimulus into the economy, claiming that purchasing government bonds has been an effective policy, to-date.

Speaking at an event in Edinburgh earlier this week, David Miles, who has supported additional stimulus throughout the year, said: “Monetary policy in the UK has been set to its most expansionary setting in history, and I believe it is right that it is still being moved further in that direction.

“I believe the evidence is that is has had a significant positive effect.”

Along with defending the decision to increase quantitative easing by £50 billion back in July, Mr Miles claimed that the alternative – a further cut in the benchmark rate – could be counterproductive, saying: “There were reasons to believe that the benefits of cutting Bank Rate further, were, at best, likely to be small and that the effects could well be perverse.

“I see no obvious reason to think that things are much different today.”

Although Mr Miles has defended the banks decision to inject further stimulus into the economy, during his speech, Mr Miles also outlined an exit strategy for when the economy finally starts to grow enough to create inflationary pressures.

He said that to ensure that the current policy of quantitative easing did not simply “monetise” government debt, and that it was reversible, the Bank will need to start to normalise its policy, first by raising the base rate before eventually selling the stock of gilts it has bought, which will total at least £375 billion.