Ruth Mitchell

IoD calls for extension to Quantitative Easing

The chief economist at the Institute of Directors is calling for the government to extend quantitative easing measures by £50 billion to avoid “dire financial consequences”.

Graeme Leach believes the government can justify a second round of quantitative easing on a number of grounds, primarily as a pre-emptive measure to prepare the UK for the potential fiscal consequences of a double-dip recession.

He also argued that the unpredictability of consumer spending meant that the government cannot pin its hopes of recovery on the hope that more money will come into the marketplace.

He commented: “The time to launch the QE2 has arrived. The downside economic risks are sufficiently great to warrant an extension in quantitative easing now, in order to avoid the risk of a double-dip recession.

“We already have an L-shaped economic recovery and the hit to business and consumer confidence over the summer risks a slip back into recession, which could have serious repercussions.

The euro-zone crisis has also had a damaging effect on business confidence, resulting in the postponement of many investment projects. This is having a negative knock-on effect on consumer confidence.

Graeme added: “Expanding QE by £50 billion initially is a sensible and limited response.”

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