Bank members split over level of QE

Two members of the Bank of England's Monetary Policy Committee wanted more money put into the quantitative easing programme

Published: 10:40am, 22nd February 2012
Updated: 6:17am, 23rd February 2012

A split over how much financial support is required to jump-start Britain's flagging recovery has emerged between Bank of England members, documents reveal.

The nine-member Monetary Policy Committee voted seven to two in favour of injecting £50 billion into the Bank's quantitative easing programme at its February meeting as Adam Posen and David Miles called for a greater £75 billion boost.

Mr Posen and Mr Miles were concerned that the impact of persistently weak growth could become deeply embedded in the economy and have lasting effects for years to come, the meeting minutes said.

The pound fell against most major currencies, including the euro and US dollar, as analysts said the minutes hinted that the level of QE could be increased beyond its current level of £325 billion.

Alan Clarke, economist at Scotiabank, said he had expected the minutes to close the door on further QE - but that did not happen. He added: "We doubt the Bank will deliver more QE, but the minutes mean it is less clear-cut."

In its latest quarterly inflation report, the Bank stuck by previous forecasts for low growth and falling inflation but predicted a less severe risk of recession in the first half of this year.

While the Bank expects the UK economy to "zig-zag" in and out of growth in 2012, Governor Sir Mervyn King said the recovery was heading in the right direction, prompting many analysts to call time on further emergency support.

However, some members made a case for maintaining monetary policy - that is keeping QE at £275 billion and interest rates at record lows of 0.5%.

In support of a greater boost to QE, Mr Posen and Mr Miles said there was "a risk of prolonged period of depressed demand".

Mr Posen and Mr Miles said if inflation remained stubbornly above target after a greater level of cash was injected into the economy, the Bank could always withdraw some of the monetary stimulus.