03/06/2009 - `New money` fails to boost lending
Figures show that lending to businesses fell by almost £5 billion in April despite efforts by the Bank of England to boost money supply through its £125 billion quantitative easing (QE) programme.
According to the data, M4 lending, such as loans and overdrafts, fell by 0.9% between March and April - a reduction of £4.7 billion.
As a result of poor lending during the month the annual rate of lending growth dropped to just 0.8%.
Economists believe that the figures are "the clearest indication yet" that the Bank's QE initiative has not yet had an impact on lending to struggling businesses.
Colin Ellis, European economist at Daiwa Securities, said: "It is still early days, but that could imply that the Monetary Policy Committee (MPC) ends up having to ramp up its purchases even further - something that, at the same time, could further heighten concerns about future inflation."
The MPC is due to meet as part of its monthly policy discussions, but financial experts believe that it will decide to keep interest rates unchanged at a record low of 0.5% and QE at £125 billion, despite a £50 billion boost last month.
Copyright © Press Association 2009
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