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MPC members divided over inflation risk

All nine members of the Bank of England’s monetary policy committee voted to keep the bank rate on hold at 0.5 per cent in November, according to the latest MPC minutes.

They also voted in favour of keeping the level of quantitative easing asset purchases at £275bn, following October’s £75bn increase.

However, the members were divided on whether there was a need for more QE once the current round – which will take a further three months to implement – was completed.

It says: “Some members noted that the balance of risks to inflation in the November Inflation Report projections meant that a further expansion of the asset purchase programme might well become warranted in due course; anticipation of that might itself have an effect on asset prices and demand. Some other members judged that the risks to inflation around the target were more balanced.”

Policymakers also warned that the chances of a eurozone crisis had increased in the past month, highlighting increases in the cost of borrowing for those countries and falls in confidence.

“While the worst risks had not so far crystallised, the threat of their doing so had increased, exacerbating the already severe strains in bank funding markets and financial markets more generally. Once implemented, the package of measures that had been announced by euro-area leaders should provide more time for countries to rebalance their economies and improve their competitiveness. But even so, the process of rebalancing was likely to act as a continuing drag on demand in the euro-area periphery, as fiscal consolidation continued and wage growth was depressed,” the minutes say.


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