Money figures make Bank action more likely

The Bank of England's preferred measure showed money growth shrinking by 0.9% in September - compared with anaemic 0.1% growth in August - despite efforts to pump in £175 billion through quantitative easing (QE).

Money growth is also falling at an annualised quarterly rate of 1.7%, the biggest drop since the Bank's records began in 1998.

Daiwa Securities economist Colin Ellis predicted that QE would be expanded by £50 billion at the Bank's monthly meeting next week - especially in the light of last week's shock fall in third-quarter GDP.

"It is a clear signal that the Bank needs to do more," he said.

Vicky Redwood of Capital Economics said: "While the monthly figures can be volatile, it is clear that money growth is still well below rates needed for a decent economic recovery."

Today's figures showed "broad money" holdings - bank and building society deposits and cash, known as M4 - in households was up 0.3% month-on-month in September, down from 0.5% in August.

But lending to households grew by just 0.1% in August and the annual rate of growth slowed further to 2%.

M4 lending to businesses was down 0.1% on the month and is now 3.4% lower than a year ago, the figures showed.

"While the latest survey evidence such as the Bank of England's Trends in Lending report for October indicate that banks are expecting to step up their lending to corporates, this is yet to show up in the hard data," IHS Global Insight's Howard Archer said.

The uncertainty over the impact of the unprecedented measures to boost the money supply was expressed by the newest member of the Bank's Monetary Policy Committee earlier this week.

Adam Posen compared it to "driving a 10-year-old used Vauxhall Vectra with a cranky transmission, down a rural road... without a good map or signage, and with all kinds of strange surprises blocking traffic".

"You will get where you are going using QE, but you are not sure how long it will take to get there, and you will not enjoy the ride," he added.