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MPC unaminous on QE decision

Robyn Hall

September 18, 2013

And all committee members agreed that none of the three knockout conditions that would invalidate the forward guidance, announced in August, had been breached.

The minutes report stated: “In that light the guidance remained in place and no MPC member thought it appropriate to tighten the stance of policy at the current juncture.”

Last month Governor Carney unveiled forward guidance on the Bank rate which stated interest rates would remain at the current level of 0.5% until the unemployment rate dropped below 7%.

The MPC added that it stood ready to undertake further asset purchases while the unemployment rate remains above 7% if it judges that additional monetary stimulus was warranted.

The knockout conditions, which if breached will trigger a rise in interest rates, are; in the MPC’s view, it is more likely than not, that CPI inflation 18 to 24 months ahead will be 0.5% or more above the 2% target, medium-term inflation expectations no longer remain sufficiently well anchored and the Financial Policy Committee judges that the stance of monetary policy poses a significant threat to financial stability that cannot be contained by the substantial range of mitigating policy actions available to the FPC, the Financial Conduct Authority and the Prudential Regulation Authority in a way consistent with their objectives.

In September’s meeting members had different views about the extent to which a further loosening of the monetary stance might be warranted based in part on their judgements about the speed with which the degree of slack in the economy might be reduced if the momentum in demand continued to grow.

The committee concluded that over the month the evidence was consistent with a recovery at least as strong as that expected at the time of the August Inflation Report.

Were the recovery to falter the case for further asset purchases would be stronger but no member judged that further stimulus was appropriate at present.

In the light of the committee’s forward guidance and as described in a market notice of 5 September 2013 the committee agreed to reinvest the £1.9bn of cash flows associated with the redemption of the September 2013 gilt held in the asset purchase facility.


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