UK service sector strength 'could freeze quantitative easing'

Following the publication of the latest UK services purchasing managers' index (PMI) by Markit and the Chartered Institute of Purchasing & Supply (CIPS), one economist suggests that an extension to quantitative easing may be avoided.

Announcements on quantitative easing typically accompany the Monetary Policy Committee's base rate verdict for the month, with October's decision due tomorrow.

However, with stronger sentiment in the services sector, Ian Kernohan, economist at Royal London Asset Management, anticipates no extension of quantitative easing in the UK.

"There had been some speculation about a quantitative easing extension in the UK; however, a stronger-than-expected services PMI number should be enough to keep the Bank of England on hold this month," he says.

In the CIPS/Markit September report, activity growth was seen to recover from a low in August, taking the headline statistic for business activity to 52.8 on the index, while expectations among purchasing managers and supply chain professionals were also up over the month.