MPC unanimous over ‘wait-and-see’ policy
Bank of England rate-setters were unanimous over their “wait-and-see” policy on the economy this month despite the UK's crawl out of recession, it emerged today.
The Monetary Policy Committee (MPC) agreed that leaving efforts to boost the money supply at £200bn and interest rates at 0.5% would allow more time to judge the impact of support to the economy over the past 18 months.
Minutes of the February meeting said there was a case for more quantitative easing but it saw little point in attempts to “fine-tune” policy amid so much uncertainty.
Despite the “disappointing” 0.1% growth for the economy in the final three months of 2009, the MPC judged further stimulus could push up asset prices and fuel inflation expectations — although for some members the decision was “finely balanced”.
Forecasts published by the Bank last week showed its Consumer Prices Index (CPI) benchmark well below 2% over its three-year horizon, despite a short-term spike to 3.5% in January driven by rising VAT and petrol prices.
But the minutes said the forecasts did not show an “overwhelming risk” of a rapid fall in inflation, and so “did not suggest an immediate need for a further relaxation of the policy stance”.
Although all nine members of the MPC voted to hold fire, Capital Economics' Vicky Redwood said the tone of the minutes suggested it was a “close-run thing”.