West Midland business leaders have welcomed the Bank of England’s decision to extend its quantitative easing (QE) programme by £50 billion to £325 billion.
Keeping the bank interest rates at record low of 0.5 per cent is another positive step to encourage business growth and investment, said Michael Ward, president of Birmingham Chamber of Commerce.
The Bank’s Monetary Policy Committee (MPC) voted to increase (QE) - effectively printing more cash - despite the risks it poses to the country’s inflation rate.
Mr Ward said: “There needs to be an added boost to the economy to undo the stagnation and decline we’ve seen in recent months. “Demand is faltering and interest rates cannot be lowered much more, so putting more money into the economy and increasing quantitative easing is the right step to growth.
“This will allow banks to lend to SMEs who previously might have been rejected, due to higher capitalisation requirements.”
Mike Ashton, spokesman for the West Midlands Chambers of Commerce said: “The low bank rate which has remained at 0.5 per cent since 2009 will encourage businesses to borrow money leading to investment, growth and more jobs.
“Resulting low mortgage repayments encourages consumer spending which is good news for retail businesses.
“Low interest rates also encourage businesses to export as it keeps the value of the pound down.”
The boost comes amid mixed signs for the economy as surprisingly upbeat industry surveys for January conflicted with a downgraded growth forecast from think-tank Niesr, while economists warned of the potentially damaging impact of recent extreme weather.
The move will draw criticism from pensioners’ groups who have warned that further QE could leave more than a million pensioners “permanently poorer for the rest of their lives” due to the adverse effect money-printing has on annuity rates.
(With additional reporting from Jamie Grierson, Press Association City Staff)