MPC votes against QE increase but keeps open mind on more stimulus

The Bank of England has hinted that it is open to boosting quantitative easing in the months ahead, despite just one member voting for it at the last Monetary Policy Committee meeting.

The minutes of May’s meeting show eight of the nine members voted to maintain the QE programme at £325bn.

One committee member, David Miles, argued instead for a further £25bn to take the programme to a total of £350bn.

But the minutes say the decision to hold monetary policy was finely balanced. The MPC held off on expanding the asset purchase facility, taking the view that inflation was about as likely to be above the target as below it in the medium term.

The minutes add: “On the other hand, there was a case for injecting further monetary stimulus.”

Last week the International Monetary Fund claimed the Bank should look at cutting interest rates and consider more QE in a bid to tackle the UK’s economic woes.

The IMF says the Bank should reassess the efficacy of cutting rates below 0.5% and boosting QE, claiming that while monetary stimulus has helped, the economy remains flat.

The MPC’s meeting was held before the IMF meeting.

Samuel Tombs, UK economist at Capital Economics, says the MPC appears to be willing to add to QE if economic data suggests further weakness in the economy.

He says: “Although Miles was the sole voice on the committee calling for more QE, the committee went as far as considering the case for more stimulus.

“Furthermore, the eurozone crisis has intensified since the meeting and the committee did not know about April’s sharp fall in inflation at its meeting.”