Thursday June 21, 2012
Bank of England on verge of new stimulus
LONDON: The Bank of England (BoE) is close to launching a new round of monetary stimulus because of the worsening eurozone crisis, according minutes of its last policy meeting, which showed officials split 5-4 on the move, with governor Mervyn King in favour.
The minutes show far stronger explicit support for more asset-buying quantitative easing than many economists had expected, and is the first 5-4 split on the Monetary Policy Committee (MPC) since June 2007. King was last in a minority in August 2009, when he also supported more quantitative easing (QE) than the majority.
Last month BoE policymaker David Miles was the only official to call for an expansion of quantitative easing which is designed to help the economy by making borrowing cheaper but economists had generally expected him to be joined by only one or two further members of the MPC this month.
King and external members Adam Posen and Miles both voted to increase quantitative easing by £50bil to £325bil. Paul Fisher, the BoE's executive director for markets, supported a £25bil increase.
Moreover, it looks likely that there could be a majority for more QE as soon as next month.
“Most members judged that some further economic stimulus was either warranted immediately or would probably become warranted in order to meet the inflation target,” the minutes said.
Data published on Tuesday showed that inflation fell unexpectedly to a 2-year low of 2.8%, further easing the way for the BoE to expand QE possibly as soon as next month. Reuters