THE BANK of England is balking at a further expansion of its balance sheet, with minutes of its January meeting, released yesterday, revealing that senior officials are wary of the effects of more quantitative easing (QE).
The Monetary Policy Committee (MPC) has ordered £375bn in asset purchases to date, in a bid to stimulate the UK’s sluggish economy. But only one of the nine-man group voted in favour of more QE.
While saying there remains “considerable further scope” for more asset purchases, the committee warned: “But there remained uncertainty about their impact on nominal demand, and they might prove less effective in boosting real output when resources needed to be shifted between sectors and while the banking system was constrained.”
Economic developments in the month prior to the meeting, held on 9 and 10 January, had been “modestly positive”, the committee also said.
“While these developments had not substantially altered the balance of risks associated with maintaining and increasing the size of the monetary stimulus, they had strengthened the belief of some of these members that no further asset purchases were required at the current juncture.”
For the third straight month David Miles voted for the QE programme to be boosted by a further £25bn in purchases, yet seven of his colleagues on the MPC supported governor Sir Mervyn King’s recommendation to hold policy as it is.
On Tuesday night Sir Mervyn said more QE could happen, but advised “we should not rely solely on general stimulus to aggregate demand.”