Will the Bank use QE as a hangover cure?

Yesterday Mervyn King coined another acronym to describe the decade ahead - his assessment is that this will be the SOBER decade - “a decade of savings, orderly budgets, and equitable rebalancing”.Some analysts are seeing his speech last night, reported here by the BBC website, as a signal that the Bank of England are contemplating more quantitative easing in the near future.

The Governor of the Bank said that at present the amount of money in the economy was still “barely growing at all” - figures released by the Bank this morning show that seasonally adjusted provisional figures for ‘broad money’ in September are as follows: M4 decreased by £5.5 billion (0.3%), compared with an average monthly increase for the previous six months of £0.8 billion. The twelve-month growth rate fell to 0.9% from 1.9% in August. M4 lending decreased by £0.7 billion (0.0%) in September. The twelve-month growth rate fell to 0.0% from 0.7% in August .

Last night the Governor said that it was a “key role” for the Bank to provide stimulus when the economy was in need, so the judgement will depend on how great that need is, and which are the greatest risks facing us - inflation, or lack of growth.