Stimulate to accumulate

Quantitative easing has been aggressively deployed in the UK and US for some months now. But will the effect be what was hoped?

The use of quantitative easing (QE) is unprecedented in the UK and the US where it has been aggressively deployed by the central banks for the last few months in an effort to stimulate the respective economies. When the programme was first announced in March it was limited to £75bn and later raised to £125bn. It has had an inevitable effect on the broad money supply (M4) that has accelerated sharply to around 8% annually from negative growth at the end of 2008. The effect on the economy has been negligible so far, but this was to be expected as the increased money supply will take tim...