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June 19, 2013 10:48 am
The majority of the Bank of England’s monetary policy makers voted against the governor at June’s policy meeting because of the improvement in economic activity seen in recent months, minutes released on Wednesday reveal.
The BoE’s Monetary Policy Committee voted six to three in favour of the decision to hold the bank rate at 0.5 per cent and the size of the asset purchase programme at £375bn.
Three members of the committee, including Sir Mervyn King in his last meeting in charge, voted for £25bn-worth of additional gilt purchases. It was the fifth vote in a row that the governor found himself on the losing side.
The minutes showed that the majority of members were confident that more monetary stimulus was not needed after economic data indicated Britain’s economic recovery “was becoming more established”.
“The modest improvement in activity on the month had been broadly based. This followed a number of months in which the news on activity had been neutral or positive,” the minutes said.
Those in favour of more easing, which also include external member David Miles and executive director for markets Paul Fisher, argued that, while the recent data were “reassuring”, the outlook was no stronger than the BoE had forecast in May.
“Those [May] projections implied only a modest recovery in growth and relatively little improvement in unemployment. Moreover, the need to rebalance both at home and abroad was likely to prove a persistent drag on growth,” the minutes said.
Some policy makers that voted against further easing questioned whether more gilt purchases would do more to harm the economy than heal it.
“Further purchases could lead to an unwarranted narrowing in risk premia and complicate the transition to a more normal monetary policy stance at some point in the future,” the minutes said.
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