Bank united on decision to hold QE, rates
MINUTES from the Bank of England’s October Monetary Policy Committee (MPC) meeting showed that the nine-member body was unanimous in its decision to keep both the cost of borrowing and quantitative easing (QE) on hold.
The MPC also said it believed that the asset purchase programme had had a positive impact on financial markets, through helping to reduce gilt yields and sterling Libor rates, as well as supporting sterling asset prices.
But City analysts, who had widely expected unanimity in October, yesterday remained divided on whether Threadneedle Street would choose to extend or pause QEat the next meeting, which is to be held over 4 and 5 November.
Capital Economics’ Vicky Redwood said the minutes of October’s MPC meeting “suggest that the Committee is open to the idea of potentially extending QE once it has revisited its forecasts for November’s Inflation Report”.
And Investec’s David Page said the minutes also discussed “differences of view” about the “balance of risks to the medium-term outlook for inflation”, which suggests that before the announcement on 5 November there is likely to be a rigorous debate.
But Page – along with many other analysts – thinks that, while it will be a difficult decision, the MPC will choose not to extend QE at the next meeting.
It is worth noting that both governor Mervyn King and David Miles, who both voted for an extension to QE back in September, did not re-state this preference, said Barclays Capital analyst Simon Hayes.
Hayes added: “This, together with the more positive slant on the data, may indicate that there is growing support on the Committee for a “soft” halt to QE in November, ie, a halt but with the clear proviso that QE could be extended further.”