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MPC was unanimous in holding base rate

All nine members of the Bank of England’s monetary policy committee voted unanimously in favour of maintaining the base rate at 0.5 per cent and continuing with the £200bn quantitative easing programme.

The minutes of the MPC’s meeting on December 9 and 10, show the members discussed the pre-Budget report and its potential impact on inflation.

Members found that the plans unveiled by the Chancellor were “unlikely to have a significant impact on the outlook for inflation”, but said a fuller analysis was needed.

The minutes say that the committee remained uncertain as to “the size and nature of the fiscal consolidation that would occur over coming years”.

The MPC expect to see consumer price index inflation increase over coming months, but warn that there is greater uncertainty over the future path of inflation than usual, due to the unknown impact of reversing the VAT cut in January.

The minutes note that the narrowing of the spread between gilt yields and corresponding overnight indexed swap rates, which members view as a positive indication of the quantitative easing programme working, has partially reversed over the past two months.

MPC members are not sure what is the reason behind this, but the minutes say the impact of quantitative easing is likely to be felt after a time lag.

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