Bank of England’s MPC still split three ways

Bank of England

Bank of England

The Bank of England’s Monetary Policy Committee (MPC) continues to be split three ways over the interest rates and quantitative easing (QE)

The minutes of the MPC’s recent meeting in December have revealed that one of its nine members again wanted QE to be expanded further, whilst another member raised his continued call for interest rates to be risen from 0.5% to 0.75%.

However, the remaining eight members of the committee all voted for the rates to stay at their current levels.

The Bank’s key interest rate has been kept at 0.5% since March 2009.

Andrew Sentence and his colleague Adam Posen have called for rates to rise in order to cool inflation, and for QE to be expanded respectively for the last three monthly meetings.

According to the most recent figures, inflation has risen by 1% from 3.2 in October to 3.3% in November led by the price rises in food, clothing and furniture.

The rate of inflation as measured by the CPI, has now remained above the 2% target that was set by the government, for more that 12 months.

QE is the Bank’s policy of putting new money into the financial system to try to stimulate the economy. It is suggested that Mr Posen wants to expand the QE programme by a further £50bn.

Following Wednesday’s downward revision to the growth of the UK economy between January and September, IHS Global Insight analyst Howard Archer said he expected the MPC to keep rates on hold at 0.5% “until at least late-2011 and very possibly into 2012″.

Mr Archer also highlighted concerns about a further slowdown in economic growth in 2011 as a result of the impact of the government’s £85bn spending cuts and VAT rising to 20% on 4 January.

The Office for National Statistics said UK GDP expanded by 0.7% in the third quarter, down from its earlier estimate of 0.8%.

It revised growth in the second quarter to 1.1% from 1.2%, and in the first quarter to 0.3% rather than 0.4%.

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