QE2 indicates just how close UK growth is to stalling

ON ASSET ALLOCATION

At the latest MPC meeting on 5 October, the Bank of England debated whether to launch a second bout of quantitative easing and, if so, where between £50bn and £100bn, its magnitude should fall.

The MPC determined £75bn was the appropriate scale to follow its first programme of £200bn executed from March 2009 to February 2010. It was felt £75bn sent the appropriate message to markets and the announcement struck the right balance between panicking markets and being sufficient to have a meaningful impact. The implementation of another round of QE demonstrates some of the more conventional methods have been exhausted – interest rates are close to their minimum and cannot be lowered any further. Therefore, the printing of money and purchase of gilts with that new money aims to incre...