MPC tipped to extend QE

The possibility of further economic decline and more people falling into severe debt as jobs are shed in a new recession may prompt the Bank of England's Monetary Policy Committee (MPC) to heed a new call for more quantitative easing (QE).

Chief economist of the British Chambers of Commerce (BCC) David Kern said there should be an announcement of another £50 billion of QE when the MPC meets this week, remarking:  "We believe that an announcement next week would boost confidence and ease concerns around the fate of the eurozone."

The call echoes a statement made by the BCC for such an increase that it made shortly before Christmas.

Low confidence is one factor that may be holding back economic growth, despite many companies reportedly having large reserves of cash that could be invested if they were more certain of the prospects for the economy.

The pre-Christmas statement by the BCC cited unemployment as a key issue and if the economy does decline further, many could find they are unable to service their credit card debt, loans and other borrowings.

For people in the deepest debt and owing £15,000 or more, an individual voluntary arrangement may help as these can reduce monthly payments and also ensure all debt is written off after five years.

Minutes of last month's meeting showed the MPC was unanimous in maintaining both the 0.5 per cent base rate and the level of asset purchases, with the buying of £75 billion of these announced in October still ongoing.

By James Francis