Bank of England chiefs split on plan to boost recovery
Published 21/10/2010 | 08:00
A three-way split has emerged between Bank of England policymakers this month as rate setters remained undecided over the timing of recovery-boosting measures.
Minutes of the October rates meeting showed that one member of the bank's Monetary Policy Committee (MPC) - Adam Posen - called for a £50bn hike in the so-called Quantitative Easing programme (QE), while Andrew Sentance maintained his vote for a quarter point rate hike to calm inflation.
The report confirmed a growing number of members felt the need for more QE had increased in recent months.
But the MPC held fire on QE and voted to keep rates at 0.5%, citing the bank's November inflation report as being a crucial decider in future moves.
Next month's rates meeting is likely to be a key event, when the MPC will have available the November inflation forecast, third-quarter UK gross domestic product figures (GDP) and details of the Government spending review.
There are increasing expectations that Mr Posen will gain support for more QE from other MPC colleagues in November, with governor Mervyn King hinting at the need for further action in a speech last night.
The central bank boss warned there was too little money in the economy and said monetary policy remained a "potent weapon" to boost the recovery.
But economists are still unsure over when the Bank will add to its existing £200bn asset purchase programme, which has been on hold since the last increase in November 2009.
Howard Archer, chief economist at IHS Global Insight, said: "It could happen as early as the November MPC meeting if the third-quarter GDP data show only weak growth and other data and survey evidence point to a poor start to the fourth quarter.
"However, we suspect that most MPC members would prefer to hold fire for the time being, given the ongoing stickiness of inflation."
The minutes showed members believed there had been encouraging signs in consumer spending and on bank credit conditions, which could mean spending cuts may prove less of a drag on growth than previously feared.