Doubts over QE

It is difficult to understand what the Bank of England's decision to raise the stakes in the quantitative easing measures actually signals for the economy.

Yes the £50b expansion in the next three months will no doubt stimulate demand in the economy and yet does it signal that the downturn is worse than expected?

The bank, which left interest rates unchanged this lunchtime, says that it is still concerned with the world wide banking system.

“The world economy remains in deep recession,The global banking and financial system remains fragile despite further significant intervention by the authorities.”

The gilt market was certainly taken by surprise by the announcement as the move brought a hike in the price of government bonds.

There isn't as yet any definitive proof that the measures are working although next week's inflation figures will give a better indication but today's measures surely indicate that the bank itself is not convinced.

Over at the Times,David Wighton believes that the bank should

turn its focus from buying gilts to buying corporate debt, which would have a more direct impact on the credit markets.