In the U.K., the Bank of England’s Dale and Broadbent highlighted inflation risks in the past month, with Dale cautioning against “Pavlovian” calls for more stimulus.
“Prolonged and aggressive monetary accommodation, combined with increasingly unconventional policy tools, also comes with potential costs and risks,” Dale said.
The minutes of today’s decision, showing how each MPC member voted, will be released on Oct. 17. Deputy Governor Paul Tucker raised questions in an interview last week on the efficacy of more stimulus. “We still think QE works, even if in some respects it does not have the same bite it used to have,” he said.
U.K. inflation cooled to 2.5 percent in August. The BOE sees it averaging 2.1 percent in the first quarter of 2013 and reaching the 2 percent goal by the end of the year.
Policy makers, who will have new forecasts at their Nov. 8 decision, said last month that rising energy prices mean inflation is “less likely to fall back further during the second half” of 2012 than projected in August. While oil prices have eased since reaching $100 a barrel last month, they are still up about 15 percent from a 2012 low at the end of June.
As U.K. policy makers await signs of recovery, King said on Sept. 21 that the economy is likely to grow this quarter for the first time in a year after a 0.4 percent slump in the three months through June. Still, he said he wouldn’t use the phrase “green shoots.”
Bank of England policy makers are also monitoring their two-month-old Funding for Lending program and its impact on credit. The FLS is designed to encourage lending and promote growth by giving banks access to cheap funding.
The debt crisis in Europe, the U.K.’s biggest trading partner, is clouding the outlook, and recent reports have cast doubt on the strength of Britain’s recovery. Services growth slowed more than economists forecast in September, while manufacturing and construction shrank. House prices fell for a third month and will probably remain little changed into 2013 amid a “weak” economy, Halifax said today.
German factory orders probably slid 0.5 percent in August from the previous month, economists said in a survey before a report tomorrow. Australia reported August retail sales that were below economists’ estimates, while a gauge of service industries rose to a seven-month high in India. In the U.S., the Federal Reserve will publish the minutes of its Sept. 12-13 meeting later today.
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