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MPC unanimous on £75bn asset purchase

The Monetary Policy Committee voted unanimously in favour of both the £75bn Asset Purchase Facility and the 0.5% base rate reduction, committee minutes reveal.

Minutes from March’s meeting show that the MPC felt “a significant programme of asset purchases”, widely dubbed as quantitative easing, was needed to encourage spending and boost the money supply.

Pressure on banks to reduce the size of their balance sheet meant that banks were less likely to lend.

All members of the MPC agreed that as a result of tight lending conditions, reserves should be increased by between £50bn and £100bn.

Debate centred around to what extent the Bank of England should begin buying up gilts and private sector assets.

Some felt that the initial amount should be closer to the £50bn mark, given the precise impact of quantitative easing measures was unknown.

Other members argued the opposite view, with an eventual consensus on the £75bn figure.

The minutes read: “The costs of doing too little at the start were arguably greater than the costs of doing too much.

“In addition, should the first injection prove too small, there was a risk that observers would wrongly infer that such asset purchases were not an effective policy tool.”

“The initial programme of asset purchases needed to be on a scale large enough to demonstrate that the committee would do whatever was needed to boost nominal spending sufficiently to keep inflation at target in the medium term.”

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