LONDON (MNI) – The second wave of quantitative easing is set to be
as effective as the first, and there is no hard expectation in the
markets the Monetary Policy Committee will extend it further, MPC
members said Wednesday in evidence to the Treasury Select Committee.
MPC members were questioned over whether QE was effective at
present as markets had learned to anticipate it. They defended the
policy, highlighting the similarity between its impact and that of
conventional monetary policy.
“I don’t think it is unique in any sense … It certainly has
effects on market expectations and effects on rate of returns on savings
and investment but, after all, that is exactly the mechanism by which
monetary policy is meant to work,” BOE Governor Mervyn King said.
“If you think the economy is weak, then one of the reasons we cut
interest rates is to stimulate consumption and reduce savings – that is
the mechanism by which it works. So I don’t think there is anything
special about asset purchases,” he said.
King said he did not believe there were “any hard and fast
expectations that we’re going to do much more (QE).”
When MPC member Adam Posen was asked if QE2, the second wave of
quantitative easing launched in October, will be as effective as QE1 he
said “I think it will be.”
“There is one major difference between QE now versus, say, 2009. It
is we don’t have the outright lock-up and panic in the markets.”
QE back in 2009 had the additional impact of being able to ease the
market lock-up, and Posen said this effect will not be there for QE2.
“Thankfully, we are not in that kind of bad situation, so we don’t
get that additional benefit. But all the other channels for quantitative
easing … remain operative,” he said.
–London newsroom 0044 20 7862 7491; email: drobinson@marketnews.com
[TOPICS: M$$BE$]
