MPC members stay divided, say minutes

Members of the Bank of England Monetary Policy Committee (MPC) were again divided on interest rates and further quantitative easing, according to the minutes published today.

Andrew Sentance
Andrew Sentance

While seven of the nine MPC members voted to maintain interest rates at 0.5% and no additional stimulus to spending, Adam Posen preferred to increase the size of the asset purchase programme by £50 billion to a total of £250 billion.

Meanwhile, Andrew Sentence again voted in favour of raising the base rate by 25 basis points to 0.75%.

In Posen’s view, the international evidence from past recessions suggested that underlying productivity was unlikely to have declined by much and there was undoubtedly a “significant degree of spare capacity in the economy”.

In Sentence’s view, recent news has strengthened the case for altering policy “sooner rather than later”. That is the British economy had grown robustly during the third quarter, while survey pointed to continued growth in the final quarter, job creation has continued and strong global growth was placing upward pressure on commodity prices. (article continues below)

“In this member’s view, monetary policy should be used to reinforce the expectation that inflation would fall back to target through a well-communicated policy of gradually increasing [the] Bank Rate,” the minutes said.