BoE Governor outvoted over QE plan

| August 20, 2009

Minutes of the Bank of England’s August meeting have been released and revealed that the Bank of England’s Governor, Mervyn King, wanted to inject more cash into the economy but was outvoted by fellow policymakers.

Quantitative easing (QE) also known as printing money, is a process whereby the Treasury injects funds into the financial system to ease pressure on banks by giving them extra capital.

The majority of policymakers voted to expand the QE programme by £50 billion to £175 billion but Mr King, along with Tim Besley and David Miles, voted for a larger cash injection of £75 billion.

The three of them voted for a bigger increase arguing that “insufficient stimulatory monetary policy” could harm the UK’s economic recovery.

According to Vicky Redwood of Capital Economics: “The minutes of the August meeting give a strong signal that QE might yet be extended even further.”

The minutes also revealed that the MPC voted unanimously this month to keep interest rates at the record low of 0.5%.

Following the release of the minutes, sterling fell sharply with the pound falling 1% against the dollar, to $1.639, and by 0.8% against the euro, to 1.162 euros.

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