More Bank of
England asset purchases to boost Britain's weak economy are likely, even
in the face of a worse short-term inflation outlook, a number of
central bank officials said in policy minutes published on Wednesday.
The central bank said
short-term inflation pressures were likely to squeeze consumers'
disposable income, and that a global slowdown and euro bank
tensions were hurting business confidence in an economy that entered recession late last year.
The Bank is midway through a four-month
programme of 50 billion pounds of asset purchases that it started in
July, and for all but one of the nine-member Monetary Policy Committee,
it was a "straightforward" decision to carry on with it unchanged.
of these members felt that additional stimulus was more likely than not
to be needed in due course, while others saw the risks to inflation in
the medium term as being more balanced around the target," the minutes
of the MPC's September 5-6 meeting said.
policymaker argued that there was a "good case" to step up asset
purchases now, rather than wait, but in the end all nine officials voted
to keep interest rates at a record-low 0.5 percent and the asset
purchase total at 375 billion pounds.
said the minutes left intact their view that the central bank was
likely to authorise another 50 billion pounds of government bond
purchases in November, which would take total purchases to 425 billion
"I think there is still a
dovish bias there," said Ross Walker, an economist at Royal Bank of
Scotland. "It's not a done deal, but I would put about a 65 percent
probability on a November decision (for more QE)."
There was little market reaction to the minutes.
INFLATION FALL SLOWS
inflation has been above the Bank's 2 percent target since December
2009, and is now at 2.5 percent. A recent rise in oil prices, and the
threat of higher food and utility bills to come, mean that inflation is
likely to fall more slowly in the short-term than the Bank forecast in
August, the minutes said.
the Bank targets inflation over the medium term, and here the impact of
a short-term rise in oil prices is more muted, said RBS's Walker, as it
pushes down consumer demand.
Bank said it was concerned about the impact of rising employment at a
time of weak economic output, as this caused lower productivity,
potentially pushing up prices in the future.
BoE policymakers -- Ben Broadbent and chief economist Spencer Dale --
opposed July's restart to the quantitative easing programme. Instead
they have argued that the BoE's Funding for Lending Scheme, which offers
banks cheap finance if they lend to businesses and households, is a
better approach as it may help unblock some of the supply constraints in
evidence is mixed. The Bank said there were some encouraging signs that
banks were lowering interest rates, and after the minutes were
published, Lloyds Banking Group said it was drawing down 1 billion
pounds of funds to lend on.
"This initial 1 billion pounds is just the start," said Lloyds' chief executive Antonio Horta-Osorio.
a report from the BoE's regional offices released alongside the minutes
gave a different picture, saying that the cost of borrowing, especially
for smaller companies, was creeping upwards as banks passed on higher
The MPC did not
materially change its view of the euro zone at September's meeting,
which took place just before the European Central Bank approved steps to
ease strains on countries such as italy
business surveys, industrial output and retail sales backed its
assessment of "modest underlying expansion", some expectations surveys
were more worrying, the MPC said.
economy contracted by 0.5 percent in the three months through to June,
but economists polled by Reuters see a 0.6 percent rebound in the third
quarter as one-off effects fade and the London olympics
offer a modest boost.