Despite falling inflation and growing worries over the impact of the Eurozone crisis, the MPC voted by a margin of five to four to hold rates and QE.
Inflation fell back to 2.8 per cent in the year to May, its lowest level since November 2009, and is forecast to fall below the two per cent target next year, giving the Bank room to consider delivering further stimulus.
On top of that, the minutes warned the risks “from financial distress within the Eurozone had intensified,” potentially warranting action from the Bank.
The committee even considered cutting the base rate below the current record low of 0.5 per cent to lower banks’ funding costs, but decided against doing so as it could harm money markets.
The real interest rates faced by depositors are already negative; further downward movements would push even nominal interest rates close to zero, destroying incentives to save with UK banks.
Overall, the MPC concluded there is “merit in waiting to see how matters evolved” before extending QE further.