6 November 2009, 1:17pm
The Bank of England came under fire yesterday as grim economic figures cast doubt on its radical money-printing scheme.
Under the weather: The UK economy has not responded to the Bank of England's remedies. |
But a report by the National Institute of Economic and Social Research yesterday estimated that Britain's economic output fell 0.6% from September to October. It calculates the decline was 0.4% in the three months to the end of October.[Read the full analysis from the NIESR]
The figures dented hopes of a quick rebound in the economy and added to claims that quantitative easing is not lifting the economy.
The Bank hopes that by injecting new money into the financial system to encourage banks to reduce borrowing costs it will boost economic activity.
But Ted Scott, director of UK Equity Strategy at F&C Investments, said: 'It is all very well extending the programme, but the cash has to get into the broader economy, and it isn't.'
Economist Danny Gabay, of Fathom Financial Consulting, said: 'If you keep doing the wrong thing, doing more of it doesn't make it any better. The Bank seems to believe quantitative easing is having a positive impact. We are far less convinced.'
Some economists fear it could create bubbles in financial markets, posing inflationary dangers.
Simon Ward, an economist at investment firm Henderson, added: 'They are starting to take risks. I don't think the recent data really suggested further stimulus was required.'
Critics of quantitative easing say banks are simply sitting on the extra money as they focus on rebuilding their tattered finances. As a result, the scheme is not giving the economy the lift it needs.