Boe’s Bean says eco­nomic doubts may un­der­mine im­pact of QE

The Pak Banker - - Front Page -

LON­DON

Bank of Eng­land Deputy Gover­nor Charles Bean said con­sumers’ and busi­nesses’ con­cerns about the out­look may un­der­mine the im­pact of quan­ti­ta­tive eas­ing, in re­marks one week be­fore of­fi­cials’ next de­ci­sion on stim­u­lus. “Looser mone­tary pol­icy works in large part by en­cour­ag­ing house­holds and busi­nesses to bring for­ward fu­ture spend­ing to the present,” Bean said late yes­ter­day. “It is plau­si­ble, how­ever, that such in­tertem­po­ral sub­sti­tu­tion will be weaker when un­cer­tainty is el­e­vated and when banks and some house­holds are con­cen­trat­ing on re­pair­ing their bal­ance sheets.”

Speak­ing at the Univer­sity of Hull, Eng­land, Bean gave an over­view of the mea­sures the Bank of Eng­land has im­ple­mented to bat­tle the re­ces­sion and said the fi­nan­cial cri­sis showed that pol­icy mak­ers “knew less than we thought.” His com­ments come as the cen­tral bank pre­pares to pub­lish as soon as this week in­de­pen­dent re­views into its re­sponse to the tur­moil and the Mone­tary Pol­icy Com­mit­tee’s fore­cast­ing ca­pa­bil­ity.

The past five years have been “a chal­leng­ing, but hum­bling ex­pe­ri­ence,” Bean said. “As a re­sult of the cri­sis, we have found our­selves pro­vid­ing liq­uid­ity sup­port in un­ex­pected ways, de­ploy­ing un­con­ven­tional mone­tary poli­cies in alien cir­cum­stances, and de­vel­op­ing a whole new lex­i­con of macro pru­den­tial poli­cies.”

The Bank of Eng­land un­veiled a 50 bil­lion­pound ($81 bil­lion) round of as­set pur­chases in July, and pol­icy mak­ers will de­cide on Nov. 8 whether to ex­pand stim­u­lus again. Bean said while QE has pushed down long-term yields, a “more open ques­tion” is the “de­gree of trac­tion these lower yields have on de­mand at the present junc­ture.

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