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MPC rate hold unanimous

Yuan Phoon

August 17, 2011

Minutes from the MPC’s August meeting revealed Spencer Dale and Martin Weale had changed their stance to hold after voting for a 0.25% increase during the previous two meetings.

Bank of England governor Mervyn King also proposed that the Bank should maintain the stock of asset purchases financed by the issuance of central bank reserves at £200bn. Eight of the nine members voted in favour.

Adam Posen voted against the proposition, preferring to increase the size of the asset purchase programme by £50bn to a total of £250bn.

The bank rate has been held at a low of 0.5% for 29 months straight with the last rate change on 5 March 2009 when the MPC voted to decrease the Bank Rate from 1.0% to 0.5%.

The minutes of the MPC meeting said: “The slowing in world demand growth and the heightened tensions in financial markets meant that the balance of risks to the medium-term inflation outlook had clearly shifted to the downside.

“Some members considered whether there was a case for increasing the degree of monetary stimulus by undertaking a further programme of asset purchases.

“Those members concluded that the case was not yet strong enough, particularly in light of the lower path for Bank Rate now implied by financial markets.

“Further asset purchases might nonetheless become warranted were some of the downside risks to materialise.”

Some other members remained particularly concerned about risks to the upside associated with a sustained period of above-target inflation.

The minutes added: “For them, plausible outcomes for productivity growth, company margins, the degree of spare capacity in firms, or import price pass-through could also result in inflation remaining elevated.

“But recent developments had weakened the case for removing some of the monetary stimulus.”


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