Policy moves into uncharted territory

The initial impact of the Monetary Policy Committee’s first foray into quantitative easing has been fairly positive, with bond yields falling sharply. (See Chart.) But it is too early to tell whether this programme of asset purchases is having a wider success by encouraging banks to lend. It therefore does not alter our view that the economy will contract sharply this year and probably next. In fact, we now expect GDP to fall by 4% this year.