Bank of England policymakers retained the size of quantitative easing at GBP 325 billion earlier this month as demand for more stimulus by Governor Mervyn King and three others was overturned by a majority of five.
Although members acknowledged that further stimulus is likely to become warranted, a majority found merit in waiting for events occurring over the coming weeks before finalizing additional stimulus, the minutes of the meeting held on June 6 and 7 showed Wednesday.
King, David Miles and Adam Posen called for an increase of GBP 50 billion, while Paul Fisher preferred to boost the stimulus by GBP 25 billion.
"On balance, most members judged that some further economic stimulus was either warranted immediately or would probably become warranted in order to meet the inflation target," the minutes showed.
"The case for further stimulus depended in part on how those events unfolded," it said. In addition, there were questions about the form any economic stimulus should take.
The Monetary Policy Committee unanimously voted to hold the key interest rate at a record low 0.50 percent. The committee discussed cutting interest rate further down, but they concluded that it would not have any advantages over an expansion of the asset purchase programme.
At the June meeting, some members expressed a wish for the MPC to consider additional policy tools. King informed the committee that initial discussions with the Treasury is going on, about possible measures to ease funding costs of banks.
At the upcoming meeting, an increase of GBP 50 billion in QE is highly possible, economists said. It was just a matter of timing for the other five members to seek stimulus, said Vicky Redwood, economist at Capital Economics.
"We would not be surprised if the Committee returns to the other policy options further ahead," she said.
Policymakers observed that the risks to the U.K. and global activity from financial distress and political tension within the euro area had intensified again. Members see chances of a disorderly outcome.
by RTT Staff Writer
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