MPC stands united on QE
IT WAS a unanimous vote from the Bank of England’s Monetary Policy Committee (MPC) to hold interest rates and keep quantitative easing (QE) at the current level of £125bn, minutes from the July meeting showed yesterday.
The minutes of the 8-9 July meeting indicated that while the extension of QE was the central question for the Bank’s policymakers, there had not been enough clear evidence to suggest that the £125 billion target should be changed at this meeting.
The committee said it would be better to wait for the preparation of the August Inflation Report. It will offer an opportunity to reassess the stock of asset purchases in the light of a fully updated assessment of the outlook for inflation and growth.
The Bank surprised markets earlier this month when it announced the decision to keep rates and QE on hold, prompting some to say that an end to the asset-purchasing policy was in sight.
But despite some clarification from the minutes, economists still remain divided about whether the MPC will extend QE to the maximum £150 authorised by the chancellor.
Simon Hayes, chief UK economist at Barclays Capital, said: “It is difficult to see the committee having materially more information on the likely effectiveness of QE when it next meets. That being the case, barring any dramatic downside news in the data, we would not expect that QE will be extended in August.”
But others think the Bank may ask the chancellor to raise the limit. Capital Economics’ Jonathan Loynes said: “We still expect the MPC to vote to implement the remaining £25bn at the August meeting and it may yet ask the Chancellor for more beyond that.”