Debt pay down neutralises impact of QE - Ernst & Young - United Kingdom

"Tomorrow we expect the MPC to announce the winding up of QE. Since January the Bank of England has slowed down the pace of its stimulus considerably, with monthly purchases averaging only £8bn over November to January, compared with £25bn a month in the first five months of the programme.

"QE has clearly been helpful in supporting asset prices, but the usual follow through that we would expect from monetary growth into spending has not been evident. This is because when companies and consumers find the money in their bank account they are now typically using it to pay down debt instead, thus neutralising the initial monetary increase.

"The only thing that may have convinced the MPC to ramp up the programme would have been a negative GDP figure. However, now we are technically out of recession, it is unlikely that the QE programme will continue. We also expect the Bank of England to look through the short term increase in inflation and keep interest rates on hold at 0.5%."