Bank of England votes against more economic stimulus
The Bank of England voted against a further round of quantitative easing, at its latest Monetary Policy Committee (MPC) meeting.
Just one member, David Miles, voted for further asset purchase to encourage growth in the UK economy, while the other eight members voted to keep the Bank’s quantitative easing programme steady at £325bn.
The minutes of the meeting note that “for several members, the decision not to expand the asset purchase programme at this meeting was finely balanced”.
The Bank is continuing to monitor the economic outlook and there is speculation that QE could restart in summer after deputy governor Charlie Bean suggested to the National Association of Pension Funds that significant deterioration could lead to further QE.
All nine members of the MPC agreed to hold interest rates at 0.5% at the May meeting.
At the time of the meeting the latest CPI inflation figures available were for March, when it stood at 3.5 per cent.
The figures for April have been released since the meeting, showing CPI inflation fell to 3 per cent in April.
Earlier this week the International Monetary Fund (IMF) urged the UK to consider implementing further QE and reducing interest rates, in the face of continuing economic weakness.
In its report the IMF acknowledged that the UK has made progress with its efforts to reduce budget deficit, but expressed concern that the country is back in recession.
“The hand-off from public to private demand-led growth has not fully materialized,” the report said.
The ongoing crisis in the eurozone, the UK’s largest export market, could lead to further economic deterioration in the UK.
The IMF warned that the crisis is the biggest threat to the U.K. economy.
“An escalation of stress in the euro area could set off an adverse and self-reinforcing cycle of lower confidence and exports, higher bank funding costs, tighter credit, and falling asset values, resulting in a substantial contractionary shock,” the IMF said.