The minutes of the latest Monetary Policy Committee (MPC) meeting show there were “some differences of view” on whether further easing of policy would be able to make a significant improvement to the economic outlook.
“Some members felt that there was still considerable scope for asset purchases to provide further stimulus,” the minutes of the October 3/4 meeting say..
“Other members, while acknowledging that asset purchases had the scope to lower long-term yields further, questioned the magnitude of the impact that lower long-term yields on corporate debt and equity would have on the broader economy at the present juncture.”
The MPC’s nine members were unanimous in voting against any extension to the QE programme and moves to the 0.5% base interest rate. Many economists expect the Bank to boost QE by £50bn at its November meeting, as the current round of asset purchases will have concluded.
However, IHS Global chief UK and European economist Howard Archer said the division at the MPC means additional stimulus next month is far from assured.
“It is going to be a close call as to whether or not the Bank of England takes further stimulative action in November,” he commented. “Much could yet depend on just how much GDP rebounded in the third quarter and how the early survey evidence for the fourth quarter shapes up.”
Capital Economics chief UK economist Vicky Redwood agrees that the November decision will be close, but expects the MPC to add £50bn to QE. “The fact that at least some members are clearly convinced of the need to do more persuades us to stick with our forecast,” she said.
Archer added that although there could be “significant opposition” to further stimulus – possibly from MPC members Spencer Dale, Ben Broadbent and Martin Weale – the committee is likely to act next month, but argued it could add just £25bn to the programme.
