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Bank of England holds off on more quantitative easing Bank of England holds off on more quantitative easing
(5 months later)
Bank of England policymakers have voted against boosting their £375bn quantitative easing programme, amid signs of a nascent economic recovery.Bank of England policymakers have voted against boosting their £375bn quantitative easing programme, amid signs of a nascent economic recovery.
At the close of their monthly two-day policy meeting, the nine members of the monetary policy committee announced that they would leave interest rates unchanged at their record low of 0.5%, and refrain from implementing a fresh round of QE.At the close of their monthly two-day policy meeting, the nine members of the monetary policy committee announced that they would leave interest rates unchanged at their record low of 0.5%, and refrain from implementing a fresh round of QE.
For the past three months, three MPC members, including the outgoing governor Sir Mervyn King, have advocated a £25bn extension of QE, but been outvoted by their colleagues, who are concerned that inflation remains well above the government's 2% target.For the past three months, three MPC members, including the outgoing governor Sir Mervyn King, have advocated a £25bn extension of QE, but been outvoted by their colleagues, who are concerned that inflation remains well above the government's 2% target.
Howard Archer, of consultancy IHS Global Insight, said Thursday's vote may have been even closer.Howard Archer, of consultancy IHS Global Insight, said Thursday's vote may have been even closer.
"The Bank of England's decision to hold off from quantitative easing was once again likely the result of a tightly split vote. Indeed, it may even have been as close as 5-4," he said, adding that independent economist Martin Weale may have joined the dovish camp, "given his recent comments on more benign inflation developments resulting from lower oil and commodity prices as well as ongoing low earnings growth"."The Bank of England's decision to hold off from quantitative easing was once again likely the result of a tightly split vote. Indeed, it may even have been as close as 5-4," he said, adding that independent economist Martin Weale may have joined the dovish camp, "given his recent comments on more benign inflation developments resulting from lower oil and commodity prices as well as ongoing low earnings growth".
However, a no-change decision had been widely expected, after official figures showed that the economy expanded by 0.3% at the start of 2013, avoiding a "triple dip" recession. The latest data from the industrial sector, released on Thursday, showed that output increased by 0.2% in the first quarter.However, a no-change decision had been widely expected, after official figures showed that the economy expanded by 0.3% at the start of 2013, avoiding a "triple dip" recession. The latest data from the industrial sector, released on Thursday, showed that output increased by 0.2% in the first quarter.
Policymakers may also be waiting for firm evidence about the impact of the government's Funding-for-Lending Scheme (FLS), aimed at bringing down borrowing costs, before they take more action.Policymakers may also be waiting for firm evidence about the impact of the government's Funding-for-Lending Scheme (FLS), aimed at bringing down borrowing costs, before they take more action.
"With the FLS just extended in April and better-than-expected recent data, the MPC are probably comfortable waiting to see whether the improvement is sustained," said John Zhu, of HSBC."With the FLS just extended in April and better-than-expected recent data, the MPC are probably comfortable waiting to see whether the improvement is sustained," said John Zhu, of HSBC.
King will explain the MPC's decision-making in more detail when he presents the Bank's quarterly inflation report, including updated forecasts for growth and inflation over the coming months, next Wednesday.King will explain the MPC's decision-making in more detail when he presents the Bank's quarterly inflation report, including updated forecasts for growth and inflation over the coming months, next Wednesday.
Next week's press conference will be the last before King gives way to Mark Carney, the Canadian hand-picked by George Obsorne to take over in Threadneedle Street, at the start of July.Next week's press conference will be the last before King gives way to Mark Carney, the Canadian hand-picked by George Obsorne to take over in Threadneedle Street, at the start of July.
Lee Hopley, chief economist at manufacturers' group the EEF, said: "Some signs of growth at the start of the year, together with some stabilisation of activity indicators in April will have been regarded as positive. But confidence that the underlying growth situation is improving will be fragile, leaving the possibility of more asset purchases on the table."Lee Hopley, chief economist at manufacturers' group the EEF, said: "Some signs of growth at the start of the year, together with some stabilisation of activity indicators in April will have been regarded as positive. But confidence that the underlying growth situation is improving will be fragile, leaving the possibility of more asset purchases on the table."
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