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MPC divided over plans for more QE in future


The Monetary Policy Committee voted unanimously to maintain the base rate at 0.5 per cent and continue the £375bn asset purchase programme earlier this month.

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

Some members feel there is 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 a Reuters survey of economists expect a further expansion of the asset purchase programme at some stage.

On the Funding for Lending scheme, the MPC minutes refer to the Bank’s 2012 Q3 Credit Conditions Survey which says although bank funding costs have started to come down and there has been a particular improvement in the rates on loans over 75 per cent LTV, it is too soon to expect any significant impact on how much is actually being lent.


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