Chancellor George Osborne has called for the Bank of England to loosen monetary policy to boost the economic recovery.
Osborne made the call yesterday, at the launch of the Organisation for Economic Co-operation and Development’s report on the UK economy, in a highly unusual move a day before the BoE’s monetary policy committee announces its monthly decision on base rate and whether to extend its quantitative easing programme.
According to reports, Osborne said decisive moves from the Government on the deficit “means that… monetary policy can and should continue to support the economy”.
The MPC has already left base rate on hold since March 2009 and has injected £375bn into the economy to date through its QE programme.
The OECD’s report on the UK economy supports Osborne’s call.
It says: “The recovery from the recession is projected to continue to be slow and uneven. Although the scope for macroeconomic policy is becoming more circumscribed, sustained monetary stimulus through expanded quantitative easing, liquidity provision by the Bank of England and government-backed funding schemes need to continue to support the economy.”
This morning incoming BoE governor Mark Carney will face MPs sitting on the Treasury select committee in which it is likely that he will give an insight into his approach to monetary policy.