LONDON (MNI) – Bank of England Monetary Policy Committee member
Ian McCafferty, giving evidence to the Treasury Select Committee,
refused to be drawn on whether he believed more quantitative easing
would be needed.

McCafferty, who attended his first MPC meeting this month, said he
would like too see more evidence on the economy before deciding if more
quantitative easing would be required. He also refused to categorise
himself as a hawk or dove, insisting such labels were unhelpful.

In his previous job as economic adviser to business lobby group the
CBI McCafferty backed the case for QE to be extended beyond gilt
purchases, but he told the TSC he has had second thoughts on the issue.

He backed the view the newly launched Funding for Lending Scheme,
the flagship credit easing scheme, should play the central role in
ensuring companies can obtain funding and this weakens the case for the
BOE to purchase corporate bonds.

“I’m now of the view that the Funding for Lending scheme, perhaps,
addresses the direct and central problem which we have which is the
availability of credit for small and medium-sized businesses,”
McCafferty said.

“I think that some of the arguments which dictate against further
intervention into broader assets through direct QE start to play a
greater part (as a result of the FLS),” he said.

He cited other arguments against extending QE beyond gilts into
other assets.

“There is a risk to the Bank’s balance sheet so it would need
Treasury sanction but also, I think, that compared with the US, for
example, those corporate and other asset bond markets are not as deep
and liquid as they are in the United States so there is an issue about
intervening in those markets produces significant distortions in those
markets,” he said.

McCafferty cited damage to the broader economy from the
government’s austerity programme.

“I do think that the cuts in capital expenditure that we’ve seen
as a result of the austerity program will be damaging to the productive
potential of the economy. The reduction from 2.25 to 1.5 percentage
points of GDP is potentially damaging,” he said.

He firmly denied he would act as a business lobbyist on the MPC.

“I come to the MPC as an independent economist not as a lobbyist
for business,” he said.

–London newsroom: 4420 7862 7491; email: drobinson@marketnews.com

[TOPICS: M$$BE$]