The Bank of England gave a strong indication yesterday that it is preparing to inject more money into the ailing British economy.
The minutes from this month's meeting of the Bank's rate-setting Monetary Policy Committee (MPC) showed that eight members voted to keep the Bank's quantitative easing (QE) programme on hold, while just one, David Miles, backed more stimulus.
However, in a sign the MPC as a whole is leaning towards more action to support the economy, the minutes noted: "For several members, the decision not to expand the asset purchase programme at this meeting was finely balanced... further monetary stimulus could be added if the outlook warranted it." That was interpreted by City analysts as a sign that more stimulus could be on the way, possibly as early as June's MPC meeting. "It won't take much to tip the Committee into doing more QE," said Samuel Tombs of Capital Economics.
Some MPC members have voiced concerns that inflation might not fall back as quickly as they expected, but yesterday the Office for National Statistics said the Consumer Prices Index dropped in March to 3 per cent, giving the Bank more leeway for stimulus.
In its quarterly inflation report last week, the MPC cut its growth forecast for 2012 from 1 per cent to 0.8 per cent. It also said inflation would not fall below its official 2 per cent target this year, as previously forecast.
The International Monetary Fund yesterday urged the Bank of England to support the UK economy by pushing through more QE. It also called on the Bank to ease the flow of credit by buying up corporate bonds – something that has been fiercely resisted by the Bank's Governor, Sir Mervyn King.
A report by the Bank of England's agents released yesterday also showed a subdued picture. While the survey suggested some growth in consumer demand during May and a small increase in private sector capital spending, it also found a further contraction in construction output and a flat outlook for employment.
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