The Bank of England appears open to boosting stimulus in the months ahead, despite just one member voting for this move at the last monetary policy meeting.
The minutes of the Monetary Policy Committee meeting held on May 9 and 10 show eight of the group’s nine members voted to maintain the Bank’s quantitative easing programme at £325 billion.
One member – David Miles – voted against this proposition and argued for a further £25 billion to a take the programme to a total of £350 billion.
The decision to hold monetary policy was “finely balanced”. The committee held off on expanding the asset purchase facility in the view that inflation was “about as likely to be above the target as below it in the medium term”.
But the minutes add: “On the other hand, there was a case for injecting further monetary stimulus.”
The MPC’s meeting was held before the International Monetary Fund urged the UK to develop a ’Plan B’ to stimulate the economy should growth remain elusive, including the possibility of taking the base rate to 0 per cent.
Samuel Tombs, UK economist at Capital Economics, says the MPC appears to be willing to add to QE if economic data suggests further weakness in the economy.
“Although David Miles remained the sole voice on the committee calling for more QE, the committee went as far as considering the case for more stimulus,” he says.
“Furthermore, the eurozone crisis has intensified since the meeting, while the committee did not know about April’s sharp fall in inflation at its meeting.”
Howard Archer, chief UK and European economist at IHS Global Insight, agrees that the Bank has kept QE on the table.
“It is clearly mindful of the serious headwinds facing the economy and the major uncertainties surrounding the outlook – particularly the potential threat to growth coming from the eurozone situation,” he adds.