The Bank of England still has the firepower to boost the economy and could consider more quantitative easing (QE), policy-maker David Miles has said.
“We may need more stimulus,” Mr Miles, a member of the Bank’s Monetary Policy Committee (MPC (KOSDAQ: 050540.KQ - news) ) told Sky News. “That will depend on how the headwinds holding back growth play out.”
There was likely to be some positive impact into the new year from the Bank’s Funding for Lending scheme, which is designed to provide banks and building societies with access to cheap cash so that they can make loans cheaper and more easily available, Mr Miles said.
However, he added: “If it turns out that not enough has been done, that the economy’s going to stay in a recessionary state and that’s going to drive inflation down, there is more we can do. We have not run out of ammunition.” Mr Miles, who has been a strong supporter of QE, said: “There is the scope for more quantitative easing ... it remains a powerful weapon.”
Minutes from the MPC, to be released on Wednesday, will show whether or not he backed the committee’s decision earlier this month to cease further asset purchases beyond the £375bn to date.
Separately, survey data released today by Markit showed “a gradual loosening of the squeeze on overall household finances”, with Markit’s household finance index for November (Xetra: A0Z24E - news) at its highest level since December 2010.
However, this was driven by lower inflation perceptions, while income from employment continued to fall slightly and “at a marginally faster pace than in the previous month”.
Demand for loans and overdrafts rose at the slowest rate since March 2011, with particularly sluggish growth among private sector workers, Markit said.