MPC remains split over monetary policy

The Bank of England’s top policymakers remained split 6-3 against restarting its bond purchase programme for a fourth month in a row in May, amid signs that the economy is improving.
By The Newsroom
Published 23rd May 2013, 08:18 BST

As widely expected, BoE Governor Mervyn King was outvoted in his penultimate monetary policy meeting before retiring, when he called again for an extra £25bn of asset purchases.

But most other officials on the Monetary Policy Committee worried that surprising markets could create doubts about the bank’s commitment to getting down inflation, as well as noting that growth prospects were stronger than three months ago.

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“News on the month had on balance been favourable,” the minutes said. “For the first time since the February 2007 Inflation Report, the committee had revised up its projections for output over the next three years, while revising down its projections for inflation.”

The BoE’s reticence to buy more assets contrasts with ongoing bond buying by the US Federal Reserve – though some officials there have started to discuss turning off the tap – and a recent decision by the Bank of Japan to aggressively ramp up its stimulus.

Economists polled at the start of the month by Reuters saw a 55 per cent chance of more BoE asset purchases at some point later this year. A major uncertainty is whether what many view as Mr King’s flagship policy will find favour with his successor, Mark Carney, who takes over on July 1.