Policymakers of the Bank of England were unanimous in maintaining quantitative easing at GBP 375 billion early this month, the minutes of the August meeting revealed Wednesday.
The decision to retain the interest rate at a record low 0.50 percent was also unanimous. Policymakers led by governor Mervyn King said they will review the need for more measures in light of the impact of the recently announced credit boosting steps.
The nine-member Monetary Policy Committee discussed whether it was appropriate to expand or continue with the program of asset purchases it had agreed at its previous meeting. The meeting was held on August 1 and 2.
The minutes suggest that the central bank is likely to provide more stimulus later this year. Vicky Redwood at Capital Economics expects the MPC to announce more QE as well as cut rates in November.
Quantitative easing is a more powerful way to support ailing economy than lowering interest rates, policymaker Paul Fisher was quoted as saying by the Belfast Telegraph.
"All members agreed that it was appropriate at this meeting to continue with the asset purchase programme announced at its previous meeting," the minutes showed.
For most members, the decision was relatively straightforward. Over the coming months, the MPC could take stock of the impact of the Funding for Lending scheme and the implications this had for other potential policy options.
At the same time, for some members the decision was nevertheless more finely balanced, since a good case could be made at this meeting for more asset purchases.
Members who voted against the expansion of QE at the previous meeting said there were potentially costs to reversing July's decision.
The economy shrank 0.7 percent in the second quarter. According to policymakers, the decline in second quarter GDP was largely due to temporary factors and much of the contraction was likely to be recovered in the third quarter.
Nonetheless, output growth in both manufacturing and services were weak, highlighting the disappointing pace of recovery in GDP.
In its Inflation Report, the BoE lowered its forecast for economic growth in the next two years to around 2 percent, from 2.6 percent. The MPC also assessed that inflation was on track to meet the 2 percent target in the medium term.
Although it was too early to assess the impact of the FLS, members said it was encouraging that a number of banks had decided to cut rates on some mortgage and small-business loans.
Elsewhere, data from the Office for National Statistics showed that jobless claims and unemployment rate declined in the U.K. despite weak economic activity.
The number of Britons claiming jobless benefits unexpectedly declined by 5,900 persons to 1.59 million in July. Likewise, the ILO unemployment rate fell to 8 percent in the three months to June.
by RTT Staff Writer
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