The Bank of England's Monetary Policy Committee (MPC) was split three ways over whether to raise interest rates or to begin a second round of economic stimulus, minutes published yesterday revealed.
Ultimately, MPC members voted seven-to-two to maintain the status quo, with no further liquidity measures and interest rates kept at 0.5 per cent for the time being. However, one member, Adam Posen, voted for another £50bn of quantitative easing (QE) to "reduce the risk that a period of subdued growth would have a self-reinforcing effect diminishing the supply capacity of the economy", while Another MPC member, Andrew Sentance, repeated calls for a quarter-point rise in interest rates to head off above-target inflation risking "a loss of credibility that would be damaging to business and consumer confidence over the medium term".
Notwithstanding the majority decision to hang fire on policy changes, the minutes confirm the MPC's growing sense that Britain's flagging economy will need more money pumped into it through the £200bn asset purchase programme put on hold last November. "Some members felt the likelihood that further monetary stimulus would become necessary in order to meet the inflation target in the medium term had increased in recent months," the minutes said. "But, for them, the evidence was not sufficiently compelling to imply that such a course of action was necessary at present."
Next month's MPC meeting could be the decider. By then, members will have the Bank's November Inflation Report as well as third-quarter GDP figures and details of the £81bn of public-spending cuts outlined yesterday.Reuse content