LONDON – Ian McCafferty, chief economic adviser at the
Confederation of British Industry, has told Market News International
that he thinks that the Bank of England should take action if the UK
economy proves to be weaker than many analysts are currently
forecasting.
Earlier this week, Bank of England MPC member Martin Weale said
that monetary policy remains the “first line of defence” incase the
economy takes an unexpected turn for the worse.
“I would agree with Martin Weale, where the economy proved to be
weaker than we and others think at the moment, then I think our first
line of defence should be monetary policy rather than any significant
shift in fiscal policy,” McCafferty said.
McCafferty also said that he thought that if there was a second
wave of QE it would again be in the form of gilt-market intervention.
“Should we be investing in different assets from treasuries? I
think there are some practical difficulties with that which make it,
probably, a difficult thing to do in practice even if you thought it was
a good idea in principle,” he said.
“The size of the corporate bond market in the UK is not of a size
that QE could influence it without further distorting activity. We don’t
have the same volume of mortgage-backed products secured in the UK as in
the US, which allow the Fed to intervene in that market. It’s more a
practical problem than principle or theory,” he added.
–London bureau: 44 20 7862 7492; email: wwilkes@marketnews.com
[TOPICS: M$B$$$, MGB$$$, MFB$$$]
