THE Bank of England’s Monetary Policy Committee (MPC) was united in its decision to pause its quantitative easing programme earlier this month, but minutes of the meeting indicated that for some members, the decision was a difficult one.
The minutes showed that all nine members voted in favour of holding rates at 0.5 per cent and maintaining the stock of asset purchases – mostly gilts – at £200bn. But they also revealed that for some members, the arguments were very finely balanced.
A pause had been forecast by the markets but City analysts had expected some division. “Given the dovish tone at last week’s press conference, at least some dissension seemed likely,” said Lombard Street Research’s Melissa Kidd, who added that the decision seems to have been driven by very near-term considerations such as inflation and economic uncertainty.
Barclays Capital’s Simon Hayes agreed, saying the unanimity was surprising “given the apparently marked shift in the MPC’s inflation assessment in the Inflation Report, which saw a pronounced downgrade to its modal inflation projections.”
Last week, Bank governor Mervyn King said it was too soon to say that QE had come to an end. The minutes yesterday said: “The Committee would be able to provide further monetary stimulus should the outlook for inflation in the medium term warrant it.”
But some MPC members worried that adding to the asset purchase programme might raise the chance of unwarranted increases in asset prices.