Bank voted 7-2 in support for £50bn more QE

Ben Southwood
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THE BANK of England Monetary Policy Committee (MPC) approved its newest round of quantitative easing (QE) with seven for and two against, according to the minutes of its July meeting released yesterday.

It had considered both £50bn and £75bn increases in asset purchases, but eventually the governor Sir Mervyn King tabled only a motion for the lower amount, on fears the higher amount could push inflation well above the two per cent target it was finally falling toward.

King and the two deputy governors, Paul Tucker and Charles Bean, were among the seven members that voted to increase purchases, while Spencer Dale and Ben Broadbent dissented, worrying that the falls in inflation were temporary.

The members unanimously rejected any change in the Bank Rate, which stands at 0.5 per cent, again referring to fears that an even lower rate could push the supply of deposits down and have the unintended consequence of actually constricting credit.

MPC members also referenced the Funding for new Lending Scheme repeatedly, and were hopeful it could do a lot of work in loosening tight credit conditions.

The minutes came out the same day as two official reports on economic conditions: the Treasury’s summary of independent forecasts, and the Bank’s agents’ summary of business conditions. The agents reported gloom in almost every area of the economy, while the Treasury report showed forecasts averaging virtually flat (0.1 per cent) GDP growth for 2012.