The Bank of England should call a halt this week to its radical drive to jump-start the economy with massive injections of newly-printed money, The Times Monetary Policy Committee (MPC) recommends.

Burgeoning signs that the recession is coming to an end, with recovery taking hold, should lead the Bank to put its campaign to combat the slump by “printing” money on at least temporary hold, eight of the nine economic experts on The Times panel says.

However, one member, Professor Charles Goodhart of the London School of Economics, argued that the economy remains vulnerable and in need of further stimulus.

Prof Goodhart, a former member of the Bank’s MPC, said that it should now spend another £25 billion on the purchases of bonds through which it pumps its newly-created cash into the economy, taking the total to £150 billion. But he added that the Bank should change the focus of the quantitative easing (QE) scheme to make it more effective.

The rest of the panel urged the Bank to put the strategy on hold, at least for the moment, with most recommending that it leave the door open to further action in future if an economic upturn proves to be weak, or stalls.

Bronwyn Curtis, head of global research at HSBC, warned: “The Bank is in danger of damaging its credibility by extending quantitative easing. Without a clear economic need for further action, it could arouse suspicion that the Bank’s primary objective was the cheap financing of the Government’s debt, rather than meeting the inflation target.”

Ms Curtis said that the existing scale of QE and drastic cuts in interest rates to 0.5 per cent would take time to have their full effect and so far appear to be bolstering the economy.

Sushil Wadhwani, a leading former external member of the Bank’s MPC, agreed that recovery was emerging, arguing that “the short-term economic outlook is strongly positive”. While, Dr Wadhwani said the Bank’s decision this week was finely balanced, he said that it should pause for breath and could resume QE later if this proved necessary.

Sir Alan Budd, former chief economic adviser to the Treasury, Anatole Kaletsky, chief economics commentator at The Times, and Geoffrey Dicks, former chief UK economist at RBS, all backed this call.

“For the moment, the MPC can pause while it watches the result of its earlier actions,” Sir Alan said. Mr Dicks added: “There is nothing for the MPC to do but sit tight and see if the economy continues to recover along present lines.”

Martin Weale, director of the National Institute of Economic and Social Research, agreed, too. “Most indicators suggest that the period of sharp recession is over ...” he said.

The strongest opposition to further printing of money to extend QE came from Sir Steve Robson, former Second Permanent Secretary to the Treasury.

Sir Steve dismissed the Bank's QE scheme as having no relevance to whether a sustained recovery can be assured, pointing to the credit drought for consumers and companies as the crucial problem. He said that cracking that and boosting the flow of lending “will require the Government to take the bulk of the credit risk or to undertake another bank recapitalisation”.

Rupert Pennant-Rea, chairman of Henderson, the fund managers, and a former Deputy Governor of the Bank, was more confident over a recovery but added that “there is nothing to suggest that the rebound will be strong”, also citing credit strains as the big issue. He said that the Bank should halt QE for now, unless it was able to channel an additional £25 billion into easing stresses in the credit markets.

Professor Goodhart argued that this should be the Bank’s chief goal now. He proposed that commercial banks should be charged interest, at a rate of perhaps 2 per cent, for the cash they are presently hoarding in their official reserves with the Bank of England, giving them an incentive not to sit on these funds. “Similarly, the Bank should try to recreate the commercial paper market amd to channel its additional QE more directly to companies,” he added.

Explore Economics

• Pre-Budget Report 2009

• Budget 2009

• World Economic Forum

• The Times MPC

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive