It is a very good thing that the bank of England has at last acted, more especially because a contracting economy worries about a government that does not seem to know what to do. So any action is better than no action. Well, is it?
This Blog has a view which is expressed often. Here it is again. Assets are too inflated, profits can be made by doing nothing, too much money is available in the financial sector which is top heavy, personal borrowing is far too high, productivity is at an all time low. The base of the economy has too little money circulating and is forced to borrow to cope at interest rates way above prime. There are too few decent jobs paying good wages. The return on savings is very poor.
Seen under that analysis the last thing we need is a cut in interest rates which are tantamount to zero anyway, more lending stimulus or more QE from the Bank. What we need is the biggest investment stimulus in infrastructure and industry from the Government since the end of WWII, of which Dynamic Quantitative Easing should play a key part. What are required are political decisions. The stimulus of this misshapen economy is way beyond the remit of the central bank. Theresa May will have to make her cowardly Ministers step forward with a real plan. A bit of handbagging would be just the thing.