Economics
The Daily Mail accuses The Bank of England of a savage attack on cash-strapped pensioners as it considered flooding the economy with more emergency funds. The Bank is widely expected to increase its quantitative easing (QE) programme by £50billion today in a bid to stave off a double-dip recession. City AM argues the distinction between fiscal policy and monetary policy has broken down. By counter-acting the negative impact on the money supply of new banking regulations, the Bank of England is helping the Treasury finance spending. In 2012 (up to 2 February) it has bought £23.9bn worth of gilts, against issuance of £16.1bn. There are costs to QE including reduced discipline at a Treasury that no longer needs to worry as much about levying taxes to fund spending. Monetary policy has a huge effect on growth, jobs and inflation. It also has immense distributional effects – helping borrowers and hurting savers. There is no doubt the UK would have lost its AAA-rating in the absence of mass gilt-buying via QE. If the Bank decides to go for more QE today, it will mean Sir Mervyn King has agreed to do George Osborne’s job for another few months. The chancellor will be delighted, of course, but, argues Allister Heath – that’s not really the point, (City AM).
Meanwhile, Former Bank of England deputy governor Rachel Lomax hit out at QE and the Vickers banking reforms, calling the asset purchase programme “a stealth tax on savers.” Lomax was joined by Andrew Sentance, who warned persistently above-target inflation risked destroying the MPC’s reputation. He also urged the government to boost economic growth by cutting red tape and reforming taxes and the labour market (City AM).
Property
Rental activity increased by a quarter last year as the continuing shortfall of mortgage lending squeezed thousands of would-be property owners off the housing ladder (Financial Times).
Personal Finance
The sale of hundreds of Lloyds bank branches to the Co-op hangs in the balance, according to City sources who said the FSA could yet block the deal. One of the key sticking points is understood to be the regulator’s reservations about the Co-op’s ability to integrate its IT systems with those of Lloyds without causing huge disruption for customers (Daily Mail).
