THE MPC voted unanimously to hold interest rates at 0.5 per cent and to leave its quantitative easing (QE) target at £200bn at its meeting earlier this month.
The unity, revealed in the minutes of the January meeting released yesterday, was widely expected. Although consumer prices surged to 2.9 per cent in December, the Bank did not seem worried about price pressures and the minutes noted that it expects inflation to fall below the two per cent target in the coming months.
Although the economy probably expanded in the fourth quarter, growth remains weak and the Committee agreed that there is a “significant degree of spare capacity” that could hurt the UK’s recovery.
The Bank’s QE programme is expected to come to an end next month, however Vicky Redwood at Capital Economics does not think the Bank will reduce other stimulus measures as quickly. She said: “Fears of a near-term tightening of policy seem overdone.”
The MPC came under attack from former member, David Blanchflower, on Tuesday. In his column for the New Statesman magazine Blanchflower wrote: “It is now my view that the MPC’s days are numbered.”
Blanchflower is calling for the MPC, which he says missed the recession entirely, to adopt a similar system to the Federal Reserve in the US that targets maximum employment as well as stable prices and moderate long-term interest rates.