Easy does it: No further QE
It may not be the end of QE, but they have to hope it will be the beginning of the end. And they have to hope the Bank will will have more to show for its £200bn as the months go by.
Two observations about today's statement (see here), and a few broader implications of today's decision.
Observation One: At best, this is a very weak vote of confidence in the recovery. The paragraphs about the economy are dotted with words like "sluggish", "impaired" and "gradual". Our supply capacity is "probably impaired"; credit conditions "remain restrictive". The prospect is only for a "gradual recovery in the level of activity".
The best that the MPC can come up with on the subject of business investment is that the rate at which it is falling "appears to have eased". Likewise: "spending by households appears to have picked up a little, though that may partly reflect temporary factors".
Observation Two: They are, as expected, keeping the door open to further purchases. And the statement tries very hard to remind us that the MPC believes it is the stock of assets held by the bank that matters for monetary conditions, not the continued flow of purchases.
We'll have a good test of that this afternoon. The decision was widely expected. The stock of purchases - that is, the amount of gilts that the bank has taken out of the market - is unchanged.
That should mean that the bond market is unperturbed, and that the Debt Management Office will have no trouble shifting tens of billions of gilts over the next few months. I will be interested to see. But it would certainly be odd if the market took this as a shock.
What does this mean for the future?
One clear implication is that monetary policy has probably now been set for the duration of this Parliament. The MPC has made a habit of taking QE decisions every three months, so it can draw on the latest forecasts in the quarterly Inflation Report. If the general consensus about the timing of the election is correct, the next time the MPC thinks hard about changing monetary policy will be on polling day: 6 May.
The Bank will take issue with this assumption: in theory, monetary policy is reviewed every month. But with all the subdued language, there is surely little chance of the committee wishing to tighten policy in the next few months. And re-starting asset purchases, though perfectly possible, would be a consequential act - and send a pretty powerful signal about the state of the economy. It's hard to believe they would do that without a new set of forecasts.
Another observation would be that if this is the end of QE - and we do not know that it will be - but if it is the end, it's a pretty whimpering one. The Bank is not retiring, triumphant, from the field, the enemy slain, its job well and truly done.
The MPC is hoping the policy has worked. It sees some signs that it has. But - as the chart above shows - the conditions for lending in this country, especially to small and medium-sized businesses, are still much weaker than they would have wanted.
Quantitative easing may well have saved the economy from a credit-led depression. We will never know. It is interesting to note that monetary conditions in the Eurozone and the US are even worse than ours. That difference may be partly down to QE.
But - as the statement makes clear - the MPC needs to believe there is more to come. Its members must hope and trust that the £200bn of additional cash - roughly 14% of the economy - that they have pumped in is going to do more to help the economy over the next year.
That "long and variable" lag between action and result is one good reason to pause. Interest rate changes take a long time to show their true effects. If anything, the impact of QE could take even longer to show through. At least, that's what they tell us at the Bank.
But another reason to pause today is that, if £200bn hasn't worked, you have to wonder whether there's much point pumping in a lot more.