BoE minutes: MPC unanimous over fresh round of QE

| October 19, 2011

Minutes of the Bank of England’s October 5-6 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 third consecutive month that the Committee voted unanimously to keep rates at the record low, despite inflation running at more than double the 2% target.

Figures released yesterday by the Office for National Statistics (ONS) revealed inflation surged to 5.2% in September from August’s rate of 4.5%.

In a speech last night, the Governor of the Bank of England, Mervyn King, said inflation would fall sharply in 2012 when the recent hikes in the price of oil start to recede.

In the meantime, the minutes showed that all nine members of the MPC voted unanimously for a fresh round of quantitative easing (QE) – a scheme designed to stimulate the economy.

The minutes revealed that the Committee considered injecting between £50 billion and £100 billion into the economy.

The minutes said: “For some members, the substantial downside risks pointed to injecting a larger monetary stimulus than otherwise in order to place the UK economy in a stronger position were those risks to materialise.

“Depending on developments in the euro area and financial markets, the size of the stimulus could be adjusted in either direction.”

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 and the majority of economists expected the central bank to embark on a further round of QE.

However, while the Bank hopes the QE scheme will revive the sluggish economy, leading think tank, the Ernst & Young Item Club, warned earlier this week that the QE measures are unlikely to boost the recovery.

Its comments came just a week after the British Chambers of Commerce (BCC) said the fresh round of QE may not be enough to prevent the economy from slipping back into recession and “more radical measures” are required.

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