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BoE Minutes: MPC voted 7-2 to keep rates and QE steady

FXStreet (Łódź) - BoE Minutes from the MPC monetary policy meeting held on 9 October and released today reveal that the Committee voted 7-2 in favor of maintaining the interest rate at 0.5%. The members voted unanimously in favor of keeping the program of asset purchases steady at £375 billion.

Ian McCafferty and Martin Weale who would prefer to see an increase of the bank rate by 25 basis points said that the economic situation in the UK justified such a move. In their opinion " While CPI inflation was well below the target, this was partly the effect of the higher exchange rate and lower raw materials prices.

"Just as the Committee had looked through the first-round effects of external price pressures when they had pushed inflation up, it was appropriate to look through them at present when they were pushing inflation down. Keeping Bank Rate at its current level for too long to offset these effects risked unbalancing the recovery."

Meanwhile, the remaining seven MPC members considered low interest rates stimulating for the economy and pointed out that the "the real rate of interest consistent with stable inflation over the medium term was likely to be lower than in the past, even after slack had been absorbed."

Therefore, "a premature tightening in monetary policy might leave the economy vulnerable to shocks, with the scope for any stimulus that subsequently became necessary being limited by the effective lower bound on Bank Rate."

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