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MPC members were unanimous on QE

The minutes from October’s Monetary Policy Committee meeting show all members voted for an additional £75bn of quantitative easing.

Members also voted unanimously to keep the base rate on hold at 0.5 per cent.

The minutes show the committee considered a range of asset purchases of between £50bn and £100bn.

But committee members agreed that differences in the impact of asset purchases within this range were, in current conditions, likely to be outweighed by the degree of uncertainty about the outlook for inflation.

Moreover, the size of the asset purchase programme would be kept under review in the light of subsequent analysis and events.

The minutes say: “There was considerable uncertainty over the scale of asset purchases necessary to keep inflation at target in the medium term. Depending on developments in the euro area and financial markets, the size of the stimulus could be adjusted in either direction.

“For some members, the substantial downside risks pointed to injecting a larger monetary stimulus than otherwise in order to place the UK economy in a stronger position were those risks to materialise.”

In September’s meeting just one member Adam Posen called for a further £50bn of QE.

Jonathan Loynes, chief european economist at Capital Economics, says it had thought that one or more of the more hawkish members – in particular, Spencer Dale – might have resisted, having sounded sceptical of the case for more policy stimulus only days before the meeting.

He says: “In the end, though, the bleak run of news on both the domestic and global economies clearly persuaded all members of the need to act without delay.

“Admittedly, the committee had not seen yesterday’s higher than expected CPI figures at the meeting. But we doubt that they would have had an influence on the decision, given that inflation is very close to a peak and should soon start to fall sharply.

“The minutes suggest that the MPC thinks that the new round of QE will have similar effects to the last one, which is not particularly encouraging given the continued weakness of both bank lending and economic activity! Given this, we continue to expect at least another £75bn extension of the programme in February, and perhaps considerably more thereafter.”


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