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More QE in February, says Capital Economics

Economic research consultancy Capital Economics believes the Bank of England’s Monetary Policy Committee will initiate another round of quantitative easing in February next year.

The committee first initiated a £75bn bond purchasing programme on March 5, 2009. This most recent change to the size of the programme, on November 5, 2009, was an increase of £25bn, bringing the total to £200bn.

In a note published today, Capital Economics chief European economist Jonathan Loynes says: “With inflation still high and likely to remain so for a while, and some MPC members having only just stopped voting for tighter policy, it could take a little while for Adam Posen to persuade a majority of members to back his longstanding call for additional bond purchases.

“Given this, for now we have pencilled in another £50bn of bond purchases beginning in February next year.”

However, he did state this might occur earlier if the economy continues to remain as week as it has in recent weeks.

The note also echoed Capital Economics’ previous prediction that rates will remain on hold until mid-2013.

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