MPC member Martin Weale would be in support of another rate cut to bolster lending if it were in comparison to another round of quantitative easing by the Bank of England.  The base rate has been sitting at the historically low rate of 0.5% for months and it appears that discussion of lowering the rate might still be in the cards.  The government has activated several rounds of quantitative easing in an effort to spurn more lending and increase activity in the economy in general.

Weale believes a further lowering of the base rate would have more effect on the economy at this point than quantitative easing.  He commented on the impact of a cut in the base rate, saying: “If it were clear that the interest rate could be reduced without finding some banks got themselves into a position where they had to reduce lending because of the effects of an interest rate cut on their profits, and if it were clear a reduction in interest rates would be like all other reductions in the interest rate, I think I would probably prefer that to more QE, if I was choosing between them.”

Although Weale believes in the impact a lower base rate could currently have, he recently defended how much worse the UK economy would be in without the rounds of quantitative easing activated by the government.  This summer saw a vote by the MPC to inject 50 billion pounds into the economy.

Opinions differ regarding the addition of more QE into the economy.  Part of the root of the struggling economy is the housing sector and its continued issues.  Until first timers can once again have realistic opportunities to purchase property, economic conditions in housing will remain stagnant.