Unanimous MPC vote to maintain base rate and asset purchase programme

The Monetary Policy Committee voted unanimously in September to maintain both the Bank of England base rate and the asset purchase programme at their current levels.

The minutes from the Monetary Policy Committee meeting earlier this month show that all nine members elected to keep the base rate at 0.5 per cent and continue with the £375bn asset purchase programme.

Members felt less optimistic about the prospects for bringing down inflation than in August based on rising oil and food prices and headwinds from the eurozone crisis. Consequently, members voted to continue with the asset allocation programme at its current level but there are signs that a number of members are now saying that additional stimulus will likely be required in due course.

A pickup in domestic activity could depend on how much the Funding for Lending Scheme, launched in August, could stimulate lending to households and firms. The Committee says it is still to early to judge the effect the scheme on borrowing by the household and corporate sectors.

The minutes say: “The Committee noted that banks would need time to review fully their lending plans and products, and it was likely to be some while before there would be drawdowns on a significant scale.”

“It would probably take some time for banks to review fully their lending plans, however, and it was likely that drawings from the FLS would be spread out over the full window to end-2013.”

The Funding for Lending Scheme was launched at the start of August with the Bank of England promising to lend to financial institutions at below-market rates in order to encouraging lending to UK households and non-financial companies.