THE Bank of England’s Monetary Policy Committee (MPC) voted 8-1 to keep monetary policy on hold in August, suppressing speculation of a three-way split among members, the minutes of this month’s meeting showed yesterday.
Eight members, including newcomer Martin Weale, overruled Andrew Sentance’s third call for a 0.25 per cent rise in interest rates and kept the cost of borrowing at 0.5 per cent and asset purchases at £200bn.
With no vote in favour of QE, sterling bounced off three-month lows against the US dollar to $1.5689 immediately following the release but was unable to sustain gains.
The MPC once again mulled the arguments in favour of both further loosening and tightening before choosing to stick with the status quo. However, the minutes added that the members who had voted for no change “stood ready to respond in either direction as the balance of risks evolved”.
City economists said the MPC remained firmly in neutral mode this month with no move expected in either direction for some time to come. RBS’s Ross Walker said: “If there has been a defining characteristic over the past couple of months, it is that a form of policy petrification is setting in. All policy options were again discussed, but the August minutes convey little sense of agitation for change.”
Lombard Street Research’s Michael Taylor agreed. He said: “Minutes to the August MPC meeting confirm a fairly entrenched ‘no change’ view. Fairly robust GDP growth and above-target inflation later this year will not trigger tighter policy as the MPC is focused on prospects further out. But nor is there much prospect of more QE.”