Market Commentary and Intraday News

BoE's Bean Skeptical About Impact Of QE On Economy

201 days ago

(RTTNews) - Bank of England Deputy Governor Charles Bean questioned the effectiveness of quantitative easing to kick start the economy.

"Looser monetary policy works in large part by encouraging households and businesses to bring forward future spending to the present," he said Wednesday.

"It is plausible, however, that such intertemporal substitution will be weaker when uncertainty is elevated and when banks and some households are concentrating on repairing their balance sheets."

Speaking at the University of Hull, England, Bean said uncertainty about the outlook for demand is holding back investment spending at the current juncture.

"That does not mean that quantitative easing is impotent, as demand will still be affected by the wealth effect from the higher asset prices, as well as by any related exchange rate depreciation," he added. But there are reasons to believe that the effects of lower yields may be weaker than usual.

The past five years has been a challenging but humbling experience, Bean said. "As a result of the crisis, we have found ourselves providing liquidity support in unexpected ways, deploying unconventional monetary policies in alien circumstances and developing a whole new lexicon of macroprudential policies."

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