MPC minutes show division on interest rates decision
17 November 2010 / by Paul Dicken
Uncertainty about the economic outlook and path of inflation led to division of opinion on the Bank of England’s Monetary Policy Committee in its November meeting.
The minutes of the MPC meeting for November showed members voted along the same lines as the October meeting, with two members putting forward opposing views on changes to monetary policy.
Seven members of the committee voted to keep interest rates at 0.5 per cent and leave its quantitative easing programme unchanged.
External committee member Adam Posen voted to increase the quantitative easing programme (which involves the Bank buying assets to boost money in the financial system) by £50billion, while Andrew Sentance has argued for interest rates to go up by 0.25 per cent to reflect inflationary pressures and economic growth.
The minutes said there was a ‘wider than usual range of views’ amongst the committee on whether inflation would remain higher (currently 3.2 per cent) or begin to fall after 2011.
The majority of committee members believe the balance of risks to the economy mean the ‘highly expansionary’ approach to policy should be maintained.
The minutes said Gross Domestic Product growth for the UK had been quite broadly based in 2010 with about 2.4 per cent growth, and while business investment was 17 per cent below its pre-recession level the committee said it was possible that investment would grow ‘robustly over the next two years supported by the substantial financial surplus in the corporate sector’.
“Banks still faced a significant challenge in repairing their balance sheets, but funding conditions had eased in recent months, potentially pointing to some moderation in the headwinds to growth from constrained credit supply,” the minutes said.
Figures published by the Office for National Statistics on 17 November showed a slight increase in the UK employment rate during the three months to September.
The ONS said this quarterly increase had been driven by self-employment which had increased by 112,000 to reach a record high and by part-time employees.
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