MPC members split on further QE

Yuan Phoon

January 25, 2012

Should the UK economy undershoot its 2% inflation target, it would justify further QE.

Nine members agreed that inflation was likely to fall sharply in 2012

The decision to maintain base rate at 0.5% and continue with £275bn of quantitative easing was unanimous amongst MPC members.

The minutes noted the success of recent interventions by the European Central Bank to lend money to European banks.

It said this had already significantly increased the amount of money they were willing to lend and decreased the chance of the sovereign debt crisis spilling over into the banking system.

The committee said: “The immediate risk of a more severe dislocation in the euro area rising from banking sector difficulties appeared to have been mitigated by the ECB’s actions.”

However it warned that downside risks to the economy remained from a possible recession in the eurozone and falling demand in the UK.

Sign up to our daily email