â€œWe expect the MPC to make no changes this month, which is the correct decision in present circumstances. However the next few months will be a period of considerable uncertainty for the MPC. Though pressures for an immediate increase in QE have eased, it is possible that demands for such a response will intensify again following the contraction in the economy in the last quarter of 2012.
â€œComments made by Mark Carney, who takes over as Bank of England Governor in July, have triggered speculation that the UK will tolerate higher inflation in the future and a larger sterling devaluation in order to boost growth. These ideas are problematic. Although inflation can ease the debt burden, we know that persistent above-target price increases in recent years have squeezed businesses and consumers and damaged UK growth.
â€œAn open debate about the monetary regime is legitimate and welcome, but it is important that the transition to the new Governor does not worsen business uncertainties. During the next few months, the Bank must focus all its attention on improving the flow of lending to viable companies. The Funding for Lending Scheme, which is now helping mortgage lending, must be made more effective for businesses. On its part, the government must also accelerate moves aimed at creating a Business Bank."
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