-BOE Dale: If QE Is Less Effective, Costs May Rise Compared To Benefits
DUBLIN (MNI) – Bank of England Chief Economist Spencer Dale has
argued against the simplistic view that if quantitative easing becomes
less effective then the dosage should be increased.
Dale says that policymakers must factor in the costs as well as the
benefits of QE, and if the benefits are diminishing the costs will
become proportionately greater.
In his speech here, Dale highlighted the risks associated with
ultra loose monetary policy.
“When you are thinking about policy strategy you need to recognise
there are costs as well as benefits,” he said in a question and answer
session following the speech.
“Sometimes one hears commentators say, ‘well, suppose QE has become
less effective. Don’t worry, just double it, If it has become half as
effective just double the dosage’.”
“In a world where there are no costs associated with a policy tool
that is an entirely, emminently sensible response but if there are costs
as well as benefits and those benefits become less and the costs don’t,
then suddenly … in terms of cost/benefit analysis is starts to become
a less attractive tool,” Dale said.
In his speech he talked about the tricky challenge of unwinding QE,
with the BOE holding some 40% of the outstanding gilt stock.
Dale voted against the last tranche of QE that was sanctioned at
the July meeting by the BOE Monetary Policy Committee.
–London Bureau; Tel: +44207 862 7491; email:
drobinson@marketnews.com
[TOPICS: M$$BE$]
