THE Bank of England’s Monetary Policy Committee (MPC) voted to maintain interest rates at their historic low of 0.5 per cent for a further month yesterday, marking the longest period since the Second World War that the bank rate has remained unchanged.
The MPC also voted to keep its policy of quantitative easing (QE) at £200bn despite a call from the Institute of Directors on Wednesday for it to restart QE to the tune of an extra £50bn.
The MPC’s decision comes as members are beginning to openly disagree about the future direction of monetary policy with a three way split an increasing possibility when the minutes of the meeting are published on 20 October.
Two members in particular, Adam Posen and Andrew Sentance, are likely to have taken opposing views in the two-day discussions that precede the MPC’s announcement.
Posen has previously called for QE to be expanded and recently voiced concerns that the UK faced a “lost decade” like rival Japan during the 1990s unless more is done to aid the economic recovery.
In contrast, Andrew Sentance has voted to increase the bank rate at the last four meetings of the MPC due to inflation fears and is unlikely to have changed his view in the last month.