“Where QE Has Yet To Succeed Is Convincing Banks To Lend Money To Smaller Business Enterprises And Private Individuals.” - Says Chief Economist Of Charles Stanley, Edward Menashy

“Against market expectations of no change in the Bank Base Rate, the Monetary Policy Committee of the Bank of England (MPC) duly obliged before announcing £25bn of additional asset purchases,” says Edward Menashy, Chief Economist of Charles Stanley.

“The rationale behind Quantitative Easing (QE) is that the MPC feared it might miss the 2% CPI inflation target; hence it injected money into the economy in the hope that it would stimulate demand and force prices higher.”

“Where QE has succeeded is that it has raised asset prices and allowed companies to raise funds in the capital markets.”

“Where QE has yet to succeed is convincing banks to lend money to smaller business enterprises and private individuals. These difficulties are reflected in:

• M3 growing by only 2% p.a.
• Bank lending actually falling

“Given the background a QE initiative had to be taken, alas it has to be seen whether it can be reversed successfully. The hunt for income continues apace.”