6th October 2011
Some commentators suggest that the process, while not addressing any long term issues, may allow the UK economy some breathing space while Eurozone nations grapple with a permanent reform to deal with the crisis and satisfy bond and stock markets.
The Telegraph reports on a range of analysts' comments. Currency traders believe that sterling may fall – business leaders have welcomed the move, while others have expressed surprise at the scale at around 5 per cent of GDP.
But arguably the most telling comment sees Chris Williamson, chief economist at Markit, saying: "it is perhaps at least a worthy sticking plaster, which should bolster the domestic economy and play an important role in the global response to the slowdown, until European policymakers can find a resolution to the region's sovereign debt crisis and the UK government outlines a coherent strategy for growth, both of which are required to lift confidence among business and households for any recovery to be robust and sustainable."
Fund manager Schroders expects higher inflation and worries that the fall in inflation has not boosted experts.
Chief economist Keith Wade says: "The problem is, Gilt yields are already low, so would a slightly lower yield be enough to compensate investors for the rise in default risk? We think not. The BoE appears confident that QE can kick start growth. We have seen little evidence of a direct positive impact on growth, but raising confidence and asset prices is bound to help, albeit temporarily. Meanwhile, we do expect higher inflation as a result of the impact on Sterling. So far, QE and the fall in Sterling appears not to have boosted export volumes, only profitability, implying that new companies are struggling to set up and enter these markets."
FTAlphaville quotes Alan Ruskin of Deutschebank saying: "The comments that inflation will rise above 5% in the short-term, and then undershoot 2% in the medium-term asks a lot of the market to believe, but is the foundation of the decision to use QE again."
He notes that QE is to be spread over four months, to fit with decisions on interest rates which may mean it has less of an impact.
Cheviot Asset management's David Miller is underwhelmed.
"A new round of quantitative easing won't hurt, but it is hardly revolutionary. While it will help to sustain low interest rates, it won't do much to improve the conditions for commercial borrowers. A more effective form of intervention would be direct help for businesses needing to borrow. Still, it is good to see that QE2 has set sail at last, even if nobody is sure where it will end up," he says.
Stephanie Flanders, on her BBC Stephanomic's blog, is in sceptical mood. She writes: "Some say that QE is all a confidence trick – albeit, an important one. What, exactly, the Bank does is less important than the fact that it is seen to be doing something.The US comedian, Mitch Hedberg, had a line I reprised on the Today programme this morning: "My fake flowers died, because I forgot to pretend to water them. There's something of that in the city's support for QE2. It may not do a huge amount of good, but it could seriously hit confidence if the Bank seemed to have nothing left to throw at the recovery."
More from Mindful Money:
Sign up for our free email newsletter here.