Bank of England policy makers voted unanimously to maintain their bond-purchase target this month as officials differed on the need for more stimulus in light of growing inflation risks.
The nine-member Monetary Policy Committee led by Governor Mervyn King voted 9-0 to keep the target at 375 billion pounds ($610 billion), according to the minutes of the Sept. 5-6 meeting published in London today. All members also agreed to hold the benchmark interest rate at 0.5 percent.
“For most members this decision was relatively straightforward, although some of these members felt that additional stimulus was more likely than not to be needed in due course,” the central bank said. “Others saw the risks to inflation in the medium as being more balanced around” the 2 percent target.
Global central banks are continuing to loosen policy as the euro-area debt crisis continues, threatening global growth and financial stability. The Bank of Japan unexpectedly expanded its asset-purchase fund today, a week after the U.S. Federal Reserve voted to extend its quantitative-easing program. The European Central Bank has agreed to buy the bonds of governments that accept austerity conditions to tame the euro turmoil.
“More QE isn’t a done deal and the MPC is going to want to take stock of policy actions here and abroad,” said Alan Clarke, an economist Scotiabank Europe Plc in London. “Clearly the door’s still open. Even if the end of the world is avoided things are going to be subdued for a long while.”
The minutes showed that the September decision was “more finely balanced” for one MPC member, who saw a “good case” for adding more bond purchases this month. That’s fewer than in August, when the minutes showed that “for some members the decision was nevertheless more finely balanced, since a good case could be made at this meeting for more asset purchases.”
The Bank of England last expanded QE in July and is currently buying 50 billion pounds of gilts in a program due to run until November.
It said today that “very substantial risks” from the euro area were likely to remain for some time. These, if they crystallized, “could have a considerable impact on the stability of the global banking system,” it said.