The Bank of England should press ahead urgently today with its plans for moves to “print money” in its efforts to curb the economic slump, The Times Monetary Policy Committee recommends this morning.

The nine-strong panel of experts was sharply divided over whether the Bank should further cut interest rates from their present 1 per cent level, a low not seen for at least 314 years.

But despite some concerns that the move would stoke an eventual outbreak of inflation, or that the aggressive strategy could prove ineffective, The Times MPC unanimously called for the Bank to pursue so-called “quantitative easing”.

The Bank’s Monetary Policy Committee is expected today to embark on “QE”, creating money to buy company and government bonds to boost the amount of cash and credit flowing through the economy. But the City is uncertain whether rates will be cut.

As the Bank’s committee began its two-day meeting yesterday, The Times MPC offered their views on the key challenges.

Should interest rates be cut to under 1 per cent?
In a narrow vote, The Timespanel split by five-to-four in favour of base rates being pushed still further towards zero. The slim majority argued that little attention should be paid to the Bank’s worry that further rate cuts could backfire by squeezing high street banks’ profitability in a way that might aggravate the credit drought.

Backing a half-point rate cut Bronwyn Curtis, of HSBC, said that a base rate of 0.5 per cent should be enough to safeguard against this, although Sir Alan Budd, former chief economic adviser to the Treasury, cautioned that rates at this level were “probably as far as the Bank can go”.

Anatole Kaletsky, of The Times, and Sushil Wadhwani, a former member of the Bank’s MPC, both advocated a three-quarter point rate cut to 0.25 per cent, however.

Mr Kaletsky said that rates should be cut “immediately to zero or as near as damn it”, and not be kept high “to protect the banks from a narrowing of margins” he said were presently exceptionally high.

Yet other panel members saw little point in more rate cuts, and some agreed that a cut could be counter-productive and might risk further undercutting a vulnerable pound.

Should the Bank begin “printing money”, and if so, how much?
Times MPC members all backed QE, but with varying degrees of enthusiasm.

Ms Curtis urged that the MPC must press on with a plan it had already signalled. “Hesitating at this stage threatens to undermine the credibility they have built up over 12 years,” she said.

Sir Steve Robson, former Second Permanent Secretary to the Treasury, said that the Bank was already late in beginning QE “as it has been on just about every issue since summer 2007”.

Both he and other members conceded that it was hard to gauge how much money the Bank should create to make a difference to the economy. “There is no playbook,” Sir Steve said. “The Bank can only suck it and see.”

Ms Curtis set out the risks: “Too much and inflation will take off, too little and it won’t be effective in restoring growth.”

Charles Goodhart said that the decisions were “difficult and complex”.

Members suggested that the Bank might inject about £20 billion of new money into the economy as a starting point. Mr Kaletsky urged a bigger start of £50 billion, but others urged caution. “I would like to see the Bank start QE in a modest way . . . overshooting will simply exacerbate instability,” Rupert Pennant-Rea, a former Bank Deputy Governor, said.

What assets should the Bank buy to have most impact?
Times MPC members were also divided over the best mix of assets for the Bank to buy using QE. Professor Goodhart and Dr Wadhwani urged a focus on “those markets which are most likely to unblock frozen credit”.

Sir Steve said that he would concentrate on buying corporate debt and commercial paper in an effort to further cut borrowing costs for businesses and buy government debts, in the form of gilts, “as the residual”.

But Dr Wadhwani said that as well as targeting corporate borrowing it was important to use QE to drive down gilt yields – interest rates on government debt – to give a boost to more general economic conditions.

Ms Curtis and Mr Kaletsky urged that buying government bonds would limit the risks to the taxpayer of bad debts on other assets. Some panel members also fretted that QE would be ineffective. “It is unlikely to do a great deal on its own,” Mr Weale, director of the National Institute of Economic and Social Research, argued.

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