MPC split on stimulus restart
As widely expected Bank of England governor Mervyn King called for an extra £25bn of asset purchases but was outvoted by 6 to 3.
The majority of the Committee voted against the purchases due to fears that surprising the markets could create doubts about the bank’s commitment to reduce inflation.
The Committee also noted that the prospects of growth were stronger now than in previous months.
The minutes of the meeting read: “GDP growth in the first quarter had been faster than expected and the outlook for activity was stronger than at the time of the February inflation report.”
“The effects of the committee’s previous round of asset purchases are still coming through and, together with the extended Funding for Lending scheme, should continue to boost activity.”
The BoE’s minutes also noted that the growth outlook remained poor and that a worsening in the Eurozone debt crisis posed a “major potential impediment” to Britain’s recovery.
The MPC were unanimous in voting to keep interest rates at the record low 0.5% where they have been since March 2009.