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Bank minutes suggest further round of QE

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by Kay Mitchell

Minutes of the Bank of England’s September 7-8 meeting have been released today and have revealed all nine members of the Monetary Policy Committee (MPC) voted to keep interest rates at the historic low of 0.5%.

This was the second consecutive month that the Committee voted unanimously to keep rates at the record low after Martin Weale and Spencer Dale have been lone voices on the Committee by voting to hike rates to combat stubbornly high inflation.

Inflation rose to an annual rate of 4.5% last month from July’s reading of 4.4% and was attributed to utility companies hiking their prices.

Inflation continues to be more than double its 2% target and has been above this level since December 2009 but should return to target by 2013, according to the central bank.

In the meantime, Adam Posen, again, called for an injection of £50 billion via the quantitative easing (QE) scheme to boost the economy.

However, the minutes suggest that the majority of the MPC are considering a fresh round of QE, as soon as next month.

The minutes said: “For most members, the decision of whether to embark on further monetary easing at this meeting was finely balanced since the weakness and stresses of the past month had significantly strengthened the case for an immediate resumption of asset purchases.

“For some members, a continuation of the conditions seen over the past month would probably be sufficient to justify an expansion of the asset purchase programme at a subsequent meeting,” it added.

There have been fears that the UK could enter a double-dip recession after a recent series of bad news from the economy and the ongoing debt crisis in the euro zone.

Yesterday, the International Monetary Fund (IMF) said the global economy has entered a “dangerous new phase” and slashed its growth forecast for the UK.

In its World Economic Outlook bi-annual report, the IMF said the UK economy will grow by 1.1% in 2011 compared with its last forecast of 1.7% in April.

Many other leading organisations have downgraded their growth prospects for the UK economy and this will fuel speculation that the Bank will inject further funds into the economy to prevent it slipping into recession.

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News posted: September 21, 2011

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