MPC split over size of QE required

The Monetary Policy Committee was not unanimous in its decision to increase the size of the asset purchase programme by £50bn at its February meeting, minutes of the meeting reveal.

David Miles and Adam Posen voted to increase the size of the programme by £75bn to £350bn, but were outnumbered by the remaining seven members, who all opted to increase it by £50bn to £325bn.

The committee was unanimous on the decision to maintain the base rate at 0.5 per cent.

The minutes also reveal that the MPC’s decision to increase QE was driven by the view that the weak near-term outlook for growth and the associated downward pressure from slack in the economy meant inflation was likely to undershoot its 2 per cent target in the medium term without further monetary stimulus.

They show that the committee considered the arguments for increasing QE by either £50bn or £75bn.

The reasons put forward for the smaller advance include recent economic data suggesting growth might be stronger than expected in he near term, and the fact that short-term inflationary pressures remain.

The minutes say: “An increase of £50bn in the stock of asset purchases would represent a material monetary stimulus, and it was not clear that a stimulus larger than that was warranted at the current juncture.

“In addition, given market expectations, a larger increase risked sending a signal that the committee thought the economic situation was weaker than it was.”