DOVISH minutes from the Bank of England’s monetary policy committee, released yesterday, appear to have ruled out any normalisation of interest rates this year.
The MPC’s minutes prompted some banks to put back their forecasts for monetary tightening in the UK – with the Bank hinting that policy could be loosened even further, with another round of quantitative easing (QE).
Adam Posen continued to be the sole advocate for more QE, yet there were signs that some colleagues may be tempted to join the American.
“For some members, it was possible that further asset purchases might become warranted if the downside risks to medium-term inflation materialised,” the minutes said.
“The minutes suggest that [economic] uncertainty is likely to keep the MPC on hold well beyond August,” said Nomura, in a note. “We now expect the first rate hike in February 2012.”
“We have scaled back our forecasts for tightening by the ECB and the UK’s MPC,” echoed Citi, last night.
New member Ben Broadbent, formerly of Goldman Sachs, joined seven of the committee voting for no change. Following Andrew Sentance’s departure, only two of the committee are now voting for higher rates.