MPC divided over plans for more QE

The Monetary Policy Committee voted unanimously both on maintaing the base rate at 0.5 per cent and the continuation of the £375bn asset purchase programme earlier this month.

But the minutes from the meeting reveal that while all nine members voted in favour of continuing the asset purchase programme, opinion was divided on whether further stimulus would be required in the future.

Some members felt there was a need to further assess the potential impact lower long-term yields on corporate debt and equity could have on the broader economy before embarking on any further QE.

Capital Economics chief UK economist Vicky Redwood says: “Some thought there was still considerable scope for QE to provide further stimulus, whilst others were less convinced and emphasised the limits to what monetary policy could achieve.”

“Overall, then, it is a close call whether a majority votes for more QE next month. But the fact that at least some members are clearly convinced of the need to do more persuades us to stick with our forecast of a £50bn increase (though a rate cut seems unlikely for now).”

Four fifths of respondents to the Reuters survey of economists expected a further expansion of the Committee’s asset purchase programme at some stage.

On the Funding for Lending scheme, the Bank says it is too soon to see any impact on lending flows although bank funding costs have already started to come down and there has been a particular improvement in loans over 75 per cent LTV.