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View Full Version : Bank of England split 5-4 on more stimulus



AtW
20th June 2012, 17:03
The Bank of England is virtually guaranteed to pump more money into the economy next month, economists said, after official minutes showed that four ratesetters, including the Governor, voted for another round of quantitative easing in June.

http://i.telegraph.co.uk/multimedia/archive/02220/mervyn-king_2220709b.jpg

It was only the fourth time Sir Mervyn King has been outvoted since he took over in 2003 but the minutes suggested opinion was likely to swing behind him in July.

“Most members judged that some further stimulus was either warranted immediately or would probably become warranted,” said minutes to the June Monetary Policy Committee (MPC) meeting.

Sir Mervyn, David Miles and Adam Posen voted for £50bn more QE while Paul Fisher called for another £25bn. The other five MPC members opted to leave QE unchanged at £325bn. All voted to hold rates at 0.5pc.

Ben Broadbent hinted he might back those calling for more QE next month, saying: “I would certainly say the case has grown since May for some sort of intervention.”

The closeness of the vote came as a surprise as Mr Miles was the only MPC member to back an increase in May, of just £25bn.

George Buckley, economist at Deutsche Bank, said he expected £50bn more QE on July 5 while Kevin Daly, of Goldman Sachs, said the minutes “shift the likelihood sharply in favour of a July move, rather than waiting until August”.

The minutes also raised the prospect of QE being used to buy assets other than gilts, as a number of economists and business groups as well as Mr Posen have been demanding.

“Some members expressed a wish for the MPC to consider additional policy tools,” the minutes said.

The meeting was held before the Bank and the Chancellor unveiled an emergency liquidity facility for the banks, the Extended Collateral Term Repo (ECTR), and a “funding for lending” plan to stimulate growth.

Yesterday, banks took up the full £5bn allotted under the first ECTR auction, which is designed to improve lenders’ liquidity by allowing them to swap low-grade assets for high-grade ones. ( :eek )

The minutes also suggested the Bank’s Financial Policy Committee (FPC) may loosen its liquidity requirements next week to ease banks’ funding costs and stop rates rising in the real economy.

A decision on QE could be delayed to assess the effect of FPC policies and any new measures to stabilise the eurozone, the minutes said. However, they appeared to dismisss speculation about a rate cut to 0.25pc.

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My comment - it's the false King :eyes

TimberWolf
20th June 2012, 17:06
Once you start it's very hard to stop.

d000hg
20th June 2012, 17:08
I like how people like AtW who claimed any QE would lead to runaway hyperinflation are still banging the same drum after a couple of years and several rounds of QE have done exactly squat to inflation.

AtW
20th June 2012, 17:13
I like how people like AtW who claimed any QE would lead to runaway hyperinflation are still banging the same drum after a couple of years and several rounds of QE have done exactly squat to inflation.

The only benefit from QE is for the Govt who keeps artificially rates they pay on bonds low. Taxpayers who are savers get shafted and those who are in debt get shafted with higher inflation AND everybody gets shafted with higher taxes because the Govt prefers to avoid politically damaging cuts in Govt expenditure preferring instead to keep borrowing money (albeit at lower % due to money printing).

I've lived through 2100% annual inflation (1992 in Russia) and seen prices double every month - what happens in UK now is nothing compared to that BUT people keep being shafted here as well, albeit differently.

TimberWolf
20th June 2012, 17:17
I like how people like AtW who claimed any QE would lead to runaway hyperinflation are still banging the same drum after a couple of years and several rounds of QE have done exactly squat to inflation.

I heard it takes a while before inflation goes hypersonic, by which time it will be out of control. Still, who's worried when they have a mega sized index linked pension.

minestrone
20th June 2012, 17:34
I heard it takes a while before inflation goes hypersonic, by which time it will be out of control. Still, who's worried when they have a mega sized index linked pension.

Mervin and QE reminds me of Robin Williams in Awakenings. "Just a bit more, no a bit more, a small bit more" while the whole place is twitching.