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The Bank of England made a dramatic decision to turn off its printing presses today as it called a halt to quantitative easing.
It said it will not pump any more money into the economy having now injected a staggering £200 billion to stave off deflation and stop recession turning into depression.
The Monetary Policy Committee also left interest rates at 0.5%.
News from the Bank came as mortgage lender Halifax reported a 0.6% rise in house prices in January — the seventh successive monthly rise.
The Bank's decision to stop printing money — at least for now — marks a change of course after nearly a year of unprecedented emergency support. It has been pumping money into the economy through buying assets such as gilts and bonds since March last year.
The Bank today spoke of a “sluggish” recovery so far but said it would be supported by the money it has already printed, low interest rates, the weak pound and rising demand for exports as the global economy recovers.
It said: “The committee will continue to monitor the appropriate scale of the asset purchase programme and further purchases would be made should the outlook warrant them.”
Economists said it would have been difficult for the Bank to print more money today with inflation so far above the 2% target at 2.9%.
But they warned that if the economic recovery falters — it grew by just 0.1% in the fourth quarter of 2009 — the Bank could be forced to act again.
Vicky Redwood of Capital Economics said: “Caught between a sluggish economic recovery and a sharp rise in inflation, the MPC understandably held fire today. But it might yet have to give the economy more support later this year if growth doesn't pick up.” The decision was seen as a tight call in the City. Some observers speculated that MPC “doves” such as David Miles might have voted to print more money.
George Buckley of Deutsche Bank said: “The Bank went for the safe option today but given the mixed set of economic news we've seen over the past month we would not be surprised if one or more members of the committee were to have voted for additional stimulus.”
David Kern, chief economist at the British Chambers of Commerce, said: “Despite some tentative signs of optimism, the economy remains weak and fragile. The main priority must be to counter the threat of a double-dip recession.”
The Halifax said house prices rose by 0.6% last month — the seventh monthly rise in a row but the weakest for six months.
The average house price is now £169,777 — well above the low of £154,490 last April but still some way off the peak of £199,612 in August 2007.
Reader views (6)
The QE program has been padding bankers commissions for little real work.
If the government wants to resume support for the economy, why not do something really useful. For example they could pay off 25% of a house seller's mortgage if the house was sold for 25% less than otherwise. Imagine what a big price reductions would do to get the housing market going and restore house prices to levels at which people could afford to buy and sell.
- Tim, London, UK, 04/02/2010 18:20
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Has the goon Broon's printer run pout of ink?
Quantitive easing is simply putting off the day of reckoning and will prolong the shallow recovery even longer.
- Jose Luis, London SW18, 04/02/2010 18:12
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So the Bank of England is Easing up on Easing !! what about a bonus for the taxpayer who has been prudent and patient with his money.
- Mr S.Port, London, 04/02/2010 16:29
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QE has stopped because either 1. Broon cant print anymore money for credibility sake and or 2. We are at our fiscal limit before AAA becomes something lower. This is extremely worrying.
- Wallytrader, London, 04/02/2010 15:30
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If the UK wants to pump money into the economy why doesn't it do something useful such as repair its Third World roads.
- Brian, Farnham UK, 04/02/2010 14:06
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This country is being run by a bunch of absolute plonkers. Savers should be rewarded with higher interest rates and borrowers should pay more to finance the savers. It's called banking.
- Frederick, London, 04/02/2010 13:28
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