Bank chiefs debated action to aid growth
Bank of England policymakers considered further action to boost the economy this month amid concerns over the UK recovery, it was revealed.
Minutes of the Bank's July interest rates meeting showed the Monetary Policy Committee (MPC) looked at the need for more quantitative easing (QE) and said the Chancellor's Budget had hit the outlook for UK growth.
The MPC also noted signs that the global recovery was running out of steam.
Members opted to keep rates and QE on hold, although the minutes confirmed the latest call by member Andrew Sentance that rates should be raised by a quarter point to rein in inflation.
Details of the MPC's discussion of more help for the economy follow comments on Tuesday from member Adam Posen stating that there was a "more than 50%" chance of extending QE.
The MPC said the "prospects for GDP growth had probably deteriorated a little over the month", with surveys pointing to a "temporary slackening" in the global recovery, according to the minutes.
Members believed George Osborne's emergency Budget measures to reduce the deficit had "pushed down a little on the most likely path for output".
But they added the moves were also likely to help reduce the risk to growth from soaring UK debt costs.
Yesterday's minutes showed the committee weighing up the threat of higher-than-forecast inflation with a stuttering economic recovery.
Inflation fell to 3.2% in June, but remains above the Bank's 2% target, and the MPC said it was likely to be higher than the Bank had expected for the rest of 2010.
The MPC, which voted seven to one to keep monetary policy on hold this month, concluded the "substantial margin of spare capacity was likely to persist for some time and would bear down on inflation over the medium term".
Economists said the details of the meeting suggest interest rates are to remain at the historic low of 0.5% until well into 2011.
James Knightley, at ING Bank, said: "With global growth fears increasing and deflation perhaps more of a threat in the US and eurozone rather than inflation, the Bank is unlikely to act early and aggressively. We forecast the first rate hike for the third quarter of 2011."