Bank of England minutes show new optimism

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The Bank of England’s monetary policy committee (MPC) hailed a “modest improvement in global growth prospects” as it overwhelmingly voted to keep interest rates and QE on hold again this month.

Members were unanimous on the need to keep interest rates at a record low and only David Miles continued to push for more bond buying.

The minutes for the committee’s January meeting, published today, pointed to a number of positive developments in the world economy. Members noted the positive sentiment on stock markets since the US averted its fiscal cliff, lower borrowing costs in the eurozone and improved prospects for banks since liquidity rules were relaxed.

“There had been some evidence of a modest improvement in global growth prospects, with activity indicators picking up a little, especially outside of the euro area,” the MPC said. “There had also been further policy developments that had reduced some of the more extreme tail risks.”

However, the MPC said there had been little change in short-term monetary conditions in the UK.

Jeremy Cook, chief economist at foreign exchange company World First, said the minutes were slightly more “hawkish” than expected, but still emphasised the bank’s desire for a weaker pound.

“Although the data may suggest that inflation is rising, the paucity of growth in 2013 alongside a strong currency will probably see other members of the MPC joining David Miles in voting for more QE at the February meeting,” he said.