We thought Bank of England governor Mervyn King would provide a little detail today on the status of authorisation for full-on quantitative easing in the UK.
This is vital - it needs to be done through a joint BoE and Treasury effort.
While Chancellor Alistair Darling has already given the go-ahead for purchasing up to £50bn in financial assets (sterilised qualitative easing), King is still pursuing authorisation for up to £150bn of unsterilised reserve-funded asset purchases - quantitative easing.
However, all we got from King today was this passing remark:
Mr King told MPs he expected to start [quantitative easing] “the next few months” as the Bank starts buying up assets, thus boosting the money supply.
In fact, the content of of King’s speech to the Commons Treasury Committee today, suggests the central bank governer is fighting an uphill battle in terms of convincing the government to authorise the policy — something that’s been pilloried in the press as “printing cash” to inflate one’s way out of debt:
“We are not going to allow a great inflationary surge,” he told the Commons Treasury select committee. “The problem at present is not that the amount of money in the economy is growing too rapidly, threatening an inflationary surge, it’s that the amount of money in the economy is growing too slowly.
If King is trying to play down inflation expectations, it seems he’s failing. This has just appeared on Reuters.
LONDON, Feb 26 (Reuters) - The British public’s expectations for consumer price inflation over the next 12 months rose to 1.5 percent in February from 1.1 percent in January, a survey for Citi by pollsters YouGov showed on Thursday. For the next 5-10 years, the public expected inflation to average around 2.9 percent, up slightly from January’s record low estimate of 2.8 percent. The Bank of England targets a 2 percent level for CPI.
Related links:
Quantitative easing in the UK - FT Alphaville
Central banks live! - FT Alphaville
Quantitative and qualitative easing again - Willem Buiter’s Maverecon
