23.05.2012
By Simon Miller
The Bank of England Monetary Policy Committee (MPC) voted against further quantitative easing (QE) although for some members, the decision was finely balanced.
With just David Miles keeping up his preference for a further £25bn to be pumped into the asset purchase programme, eight members voted to keep the programme at £325bn.
Despite already increasing the size of the programme by £50bn in February, there was "no compelling evidence that the impact on nominal demand of this additional round of asset purchase would be materially different from previous asset purchases" according to the minutes.
The committee felt that with CPI expected to be above target in the medium term, it was suggested that no further asset purchases were necessary at this point.
However, it was noticed that risks surrounding the eurozone had increased and was coupled with the strengthening of sterling and the recent fall in oil prices.
"Moreover, output remained significantly below its pre-crisis trend and persistently weak growth might impair the future supply capacity of the economy through hysteric effects: that risk could be attenuated by a more aggressive loosening of policy in the near term" the minutes said.
As a result of these differing outlooks, for several members, "the decision not to expand the asset purchase programme at this meeting was finely balanced."
Yesterday, the International Monetary Fund warned that if the situation in Europe worsened then further QE could be needed.
The MPC minutes added: "The committee would continue to monitor the outlook each month and further monetary stimulus could be added if the outlook warranted it."
The committee also voted unaminously voted to keep the bank rate at 0.5% as " the fundamental policy challenges following the financial crisis and subsequent recession remained the same".
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