Time for Bank of England to hold its horses on QE policy

Tomorrow is decision time for the Bank of England's monetary policy committee. Should it prescribe another round of quantitative easing for the still-ailing UK economy? £200bn of medicine has been administered to date, so the next dose might have to be £50bn to count as meaningful. There are two reasons why the MPC probably shouldn't be so bold, or least not now. First, it has to consider the market reaction. Mervyn King said recently that the MPC, like the owners of the successful racehorse Quantitativeasing, would be "waiting for race conditions to become clearer" before deciding on 2010's outings. That sounded like a hint that QE would be paused for the time being. True, the GDP data was weak in the final quarter of 2009, but inflation was 2.9% in December. Conditions really aren't clear – so probably best not to surprise a nervous gilt market. Second, what if the dreaded double-dip recession does appear? Surely it's sensible to keep some ammunition in reserve. QE is a policy with natural limits – and £200bn is a mighty sum already.