By Simon Miller
Two members of the Bank of England Monetary Policy Committee (MPC), David Miles and Adam Posen, voted to increase the asset purchasing programme by £75bn according to minutes released this morning.
The MPC voted to increase the printing presses by £50bn this month and argued that recent data on domestic and international economies had been more positive than anticipated and although inflation had fallen back as expected there was a risk “that inflation might prove more persistent than in the Committee’s central projection”.
The minutes noted: “An increase of £50bn in the stock of asset purchases would represent a material monetary stimulus, and it was not clear that a stimulus larger than that was warranted at the current juncture. In addition, given market expectations, a larger increase risked sending a signal that the Committee thought the economic situation was weaker than it was.”
The MPC added that there was a case for a larger amount of asset purchases, “given the considerable margin of spare capacity remaining in the economy and the extent of deleveraging still likely to be required”.
It added: “There was a risk of a prolonged period of depressed demand causing inflation to fall materially below the target in the medium term. In addition, persistently weak growth might impair the future supply capacity of the economy through hysteretic effects: that risk could be attenuated by a more aggressive loosening of monetary policy in the near term.”
The £50bn increase was voted through seven to two while the MPC voted unanimously for keeping interest rates at 0.5%.