EY ITEM Club comments on Bank of England's Inflation Report

15 May 2013

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Nida Ali, economic advisor to the EY ITEM Club comments on the Bank of England’s inflation report:

  • The slightly more upbeat view of the economic outlook is welcome and is more aligned with EY ITEM Club’s forecast
  • But the broader picture is still the same with the MPC expecting a slow but sustained recovery to take hold in the coming months
  • Against this background it was sensible that Committee members refrained from authorising more QE this month

“The slightly more upbeat view of the economic outlook, with growth revised up and inflation revised down, is welcome and is more aligned with our own forecast.

“But looking at the bigger picture, the MPC’s view remains broadly unchanged since February. Committee members continue to expect a slow but sustained recovery to take hold in the UK over the coming months, as the impact of their various policy initiatives, not least the FLS, begin to feed through to the real economy.

“Against this background it was sensible that the MPC refrained from authorising further QE this month. We think that QE has passed its sell-by date and that the Bank’s other initiatives, such as the Funding for Lending Scheme (FLS), are more likely to have a positive impact on the economy. The recent extension to the FLS is encouraging and remains our best bet for providing support to the nascent recovery.”