United Kingdom: Bank of England MPC Minutes23 February, 2011, 18:05. Posted by Zarathustra
Tags: Bank of England, Economy, MPC, United Kingdom
The Bank of England Monetary Policy Committee (MPC) Minutes for the February Bank Rate Decision has been out. The MPC is in a dilemma. Speaking of the risks of inflation, the Minutes said, and here I quote:
The first [risk] was that weak growth and persistent spare capacity might cause inflation to fall to well below the target in the medium term.
Then the minutes continued and said, and here I quote:
The second risk was that the period of elevated inflation would persist for longer than the Committee expected. That could occur if externally generated inflation pressures continued and were not offset by exchange rate movements. One possibility was that the recent further increases in commodity prices, which in many cases had been associated with strong growth in emerging market economies, would continue.
A rise in medium-term inflation expectations could also result in inflation remaining elevated for longer than it otherwise would.
And then, the minutes said “the case for withdrawing some of the current exceptionally accommodative monetary policy has consequently been strengthened.”
Consequently, three members of the MPC thought the case for tightening was so “compelling”. Andrew Sentance voted to increase Bank Rate by 50 basis points (vs. 25 basis points as he voted for in the January meeting), while Spencer Dale and Martin Weale voted to increase Bank Rate by 25 basis points. So the hawk camp gained one new member: Spencer Dale, while Adam Posen, who has voted to increase the asset purchase programme a.k.a. quantitative easing for months, continued to voted for increasing the size of asset purchase by £50 bn to £250 bn.