The bank's inflation hawk changes his tune

MPC member Martin Weale, who voted regularly for rate rises, says further QE remains an option.

The markets are braced for Ben Bernanke's Jackson Hole speech today (3pm UK time) at which he could announce another round of quantitative easing (dubbed QE 3), although the odds are that he won't. Since last year's speech, which preceded $600bn of QE, inflation has risen further and US borrowing costs, which quantitative easing is designed to reduce, are already at post-World War II lows.

We'll be covering Bernanke's speech on our US sister blog (The Star Spangled Staggers) but back at home it's worth noting, as our own David Blanchflower has, an important intervention by monetary policy committee [MPC] member Martin Weale. Weale, an inflation hawk who voted regularly to raise rates until the most recent MPC meeting, has suggested that the faltering recovery means further monetary stimulus, in the form of quantitative easing, remains an option.

In a speech at the Doncaster Chamber of Commerce last night, he said: "Substantial further weakening of inflationary pressures would, of course, mean that additional monetary support rather than a withdrawal of that support would be the appropriate policy". Similarly, in an interview in today's Yorkshire Post, he remarks:

As I see things at the moment, I don't think there's a case for it (quantitative easing), if I thought the economy was likely to weaken substantially further and therefore inflation was likely to come in well under target, then obviously I would change my mind. The banking system as far as I can see is in much better shape than it was in 2008, liquidity is better, there has been quite a lot of capital raising so the banks are much healthier, but again one of the things that could create a need for more quantitative easing would be if banks did become more reluctant to lend again.

As you'll have noticed, Weale's comments on QE come with several caveats attached but the fact that a man who voted for a rate hike little more than a month ago is now contemplating further stimulus is a reminder of just how much the economic situation has deteriorated in recent weeks.

George Eaton is political editor of the New Statesman.

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PMQs review: Jeremy Corbyn prompts Tory outrage as he blames Grenfell Tower fire on austerity

To Conservative cries of "shame on you!", the Labour leader warned that "we all pay a price in public safety" for spending cuts.

A fortnight after the Grenfell Tower fire erupted, the tragedy continues to cast a shadow over British politics. Rather than probing Theresa May on the DUP deal, Jeremy Corbyn asked a series of forensic questions on the incident, in which at least 79 people are confirmed to have died.

In the first PMQs of the new parliament, May revealed that the number of buildings that had failed fire safety tests had risen to 120 (a 100 per cent failure rate) and that the cladding used on Grenfell Tower was "non-compliant" with building regulations (Corbyn had asked whether it was "legal").

After several factual questions, the Labour leader rose to his political argument. To cries of "shame on you!" from Tory MPs, he warned that local authority cuts of 40 per cent meant "we all pay a price in public safety". Corbyn added: “What the tragedy of Grenfell Tower has exposed is the disastrous effects of austerity. The disregard for working-class communities, the terrible consequences of deregulation and cutting corners." Corbyn noted that 11,000 firefighters had been cut and that the public sector pay cap (which Labour has tabled a Queen's Speech amendment against) was hindering recruitment. "This disaster must be a wake-up call," he concluded.

But May, who fared better than many expected, had a ready retort. "The cladding of tower blocks did not start under this government, it did not start under the previous coalition governments, the cladding of tower blocks began under the Blair government," she said. “In 2005 it was a Labour government that introduced the regulatory reform fire safety order which changed the requirements to inspect a building on fire safety from the local fire authority to a 'responsible person'." In this regard, however, Corbyn's lack of frontbench experience is a virtue – no action by the last Labour government can be pinned on him. 

Whether or not the Conservatives accept the link between Grenfell and austerity, their reluctance to defend continued cuts shows an awareness of how politically vulnerable they have become (No10 has announced that the public sector pay cap is under review).

Though Tory MP Philip Davies accused May of having an "aversion" to policies "that might be popular with the public" (he demanded the abolition of the 0.7 per cent foreign aid target), there was little dissent from the backbenches – reflecting the new consensus that the Prime Minister is safe (in the absence of an attractive alternative).

And May, whose jokes sometimes fall painfully flat, was able to accuse Corbyn of saying "one thing to the many and another thing to the few" in reference to his alleged Trident comments to Glastonbury festival founder Michael Eavis. But the Labour leader, no longer looking fearfully over his shoulder, displayed his increased authority today. Though the Conservatives may jeer him, the lingering fear in Tory minds is that they and the country are on divergent paths. 

George Eaton is political editor of the New Statesman.

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