MPC minutes show divisions over launching more QE

The Bank of England’s monetary policy committee remained split over whether to launch another around of quantitative easing this month, the minutes from its March meeting show.


On 7 March, the MPC voted to hold interest rates at 0.5 per cent and to keep its QE programme at £375bn.

The March minutes show governor Sir Mervyn King, deputy governor Charlie Bean and Paul Tucker all voted for another £25bn of QE but the six other MPC members decided to maintain the programme at its current levels.

Those arguing for another £25bn said inflation is stable, wage growth is weak and there is a degree of slack in the economy for more QE. They also argued it would help prevent increases in unemployment and a lowering of UK productivity.

Those arguing against more QE decided any more Bank asset purchases could cause inflation to rise which could harm sterling and there are limits to what QE could achieve.

The MPC was unanimous in voting against any change to interest rates and agreed the market is not expecting a rise before 2015.

It said: “Over the month as a whole, forward overnight index swap rates, a proxy for market expectations of bank rate, had fallen by five to 15 basis points out to maturities of around four years. Market participants had pushed back their expectations of the timing of the first increase in bank rate, so that it was not fully priced in before the end of 2015.”

The MPC also discussed the Funding for Lending scheme and net lending figures from Q4 which show a drop of £2.4bn – described as “disappointing” by King.

The MPC said the FLS is performing better than the data suggests with credit beginning to feed through to companies and signs of the housing market “thawing” as a result.

It said it expects the UK economy to improve through the year but repeatedly pointed to political uncertainty in Italy as a possible break on growth.

The MPC dismissed the UK’s credit rating downgrade from Moody’s last month, saying it was “widely expected” and had “no discernible impact” on gilt yields.