MPC was “finely balanced” on further QE

By DOMINIC JEFF
Published on 24/05/2012 03:19

Members of the Bank of England’s monetary policy committee voted eight to one against printing more money this month but hinted they may change their minds if the economy does not improve.

Only David Miles favoured more quantitative easing in May, but the minutes reveal that for several other MPC members the decision was “finely balanced” at the meeting two weeks ago.

Miles had been widely expected to favour a looser monetary policy but the fact that fellow dove Adam Posen did not join him surprised some economists. However, recent comments from Posen suggest he may well vote for a further cash injection in June.

The bank’s last round of quantitative easing came to an end this month, leaving the total added to the economy by purchasing UK government debt on the secondary market at £325 billion.

Members voted unanimously to hold interest rates at their record low of 0.5 per cent, where they have been for more than three years.

Howard Archer, chief UK economist at IHS Global Insight, said: “The Bank of England is clearly maintaining an open mind and a flexible approach to whether more QE will be needed despite bringing it to a halt in May.

“It is evident that the MPC will closely review its decision in June and over the coming months in light of whether or not the economy shows evidence of underlying improvement and how sticky consumer price inflation proves to be. The implication is that as things stand the Bank of England will hold fire on QE, but any deterioration in the underlying growth outlook and it will pull the trigger again.”

The International Monetary Fund this week urged the bank to loosen its policy further by pumping more money into the struggling economy and even to consider cutting the interest rate further.