The appointment of Mark Carney as the new governor of the Bank of England has received guarded approval from the financial press this week who hope that he will take a more active role in stimulating the UK economy.
The Bank of England interest rate setting committee is meeting Thursday this week and is expected to reject any further boost to quantitative easing beyond its current level of £375bn.
The BoE's figures show that RBS and Lloyds have reduced the amount of money they lend to households and businesses, while Barclays has threatened to cut back following demands from the main City regulator that it must bolster its reserves. The Co-op, which recently abandoned its planned take-over of 600 Lloyds-TSB branches, is in trouble after discovering a large shortfall in its capital reserves.
The funding for lending scheme designed to cut the cost of borrowing has pushed down the cost of mortgages since it was launched last year, but unfortunately has made little difference to the level business lending.
A leading think-tank has called on Mark Carney to bypass the main banks with a direct intervention into the housing industry to support the building of 60,000 homes. The New Economics Foundation has said that instead of using quantitative easing to buy government bonds, the BoE should buy assets that will directly support the economy, which would mean purchasing bonds to support home building and energy efficiency, infrastructure projects and small business lending.
It will be interesting to see if the new broom sweeps clean and wakes up the Old Lady of Threadneedle Street, or, continues to brush these innovative ideas under the carpet!
