MPC says growing need for further QE
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Minutes for September’s Monetary Policy Committee meeting show some members now feel the probability of further quantitative easing to stimulate the economy has increased.
While Committee members argued that the 0.5% base rate and existing £200bn QE programme were appropriate for the current inflation outlook, worries over the economy going forward led some members to argue that the probability of further QE being necessary had actually gone up.
The MPC says the upside risks to inflation had not changed materially, despite the fact that CPI inflation held steady at 3.1% in August.
But some MPC members expressed concern that there might be more spare capacity in the economy than they originally thought in the months ahead, which therefore increased the downside risks to the inflation outlook.
Samuel Tombs, UK economist at Capital Economics, says: “Given this stance, any rise in Bank rate appears to be some way off. Moreover, September’s minutes reinforce our long-held view that the MPC will have to resort to another tranche of QE in the near future – perhaps a further £50bn or so when the fiscal squeeze really kicks in at the start of next year.”
Rate rebel Andrew Sentance was once again the only MPC member to call for a 0.25% increase in base rate.
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