ITEM Club supports the Bank's measures around loosening monetary policy but feels more may be needed to boost credit demand

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Nida Ali, economic advisor to the EY ITEM Club, comments on today’s MPC minutes:

  • Given strong evidence that MPC members are concerned about the growth outlook, it was slightly surprising that two members voted for no increase in QE
  • However the tone of the minutes was very dovish, with unanimous support for the new lending policies
  • We support the Bank's measures in loosening monetary policy but feel that more may be needed to boost credit demand

“Events over the last month, including the narrow vote for QE in June and the Governor's Mansion House speech, have made it clear that MPC members were becoming increasingly concerned about the growth outlook. Against this background, it was slightly surprising that there was a split in the vote to raise QE, with two members voting for no increase.
 
“Nevertheless, the tone of the minutes was very dovish, with even the two dissenters adding their support to the recent set of policy announcements aimed at supporting lending flows.
 
“We are strongly in favour of looser monetary policy and support the Bank's recent efforts in this regard. However, most of the Bank's measures are aimed at increasing credit supply, even though there is evidence to suggest that lack of demand for credit is still a major reason for low lending levels. While raising the size of asset purchases should help, it is possible that further support may be needed in the future."