MPC outvotes King over QE extension
The Monetary Policy Committee remained split over the prospect of a QE extension during its June meeting.
Wednesday 19 June 2013
The Bank of England’s outgoing governor failed in his bid to increase the scale of the quantitative easing (QE) programme during his final meeting at the helm of the Monetary Policy Committee (MPC).
Minutes from the committee’s June meeting have revealed that Sir Mervyn King was among three members who were keen to see a £25 billion extension of the QE programme.
Paul Fisher and David Miles joined the governor in calling for a further QE stimulus in a bid to kick-start the UK economy.
However, the nine-strong committee outvoted the trio by six to three, with the QE scheme due to remain at its existing level of £375 billion for at least another month.
According to the meeting minutes, Sir Mervyn expressed a desire for further QE measures as a result of the modest pace of the UK’s economic recovery.
But, in response, the six MPC members who voted to hold QE at its current level cited “striking” surveys from the construction, manufacturing and services industries, which have offered encouraging signs in recent weeks.
In addition to the QE decision, the MPC’s members decided to maintain the base rate at its record low level of 0.5% during their June meeting. The rate has remained unchanged since March 2009, posing problems for the country’s savers.
Carney takes charge
After chairing his 194th and final rate-setting meeting, Sir Mervyn will now hand over the position of Bank governor to Mark Carney, who is due to begin work at the start of July.
While the UK economy avoided a triple-dip recession in the opening quarter of 2013, inflation remains a key concern for policymakers.
The central bank recently warned that the consumer prices index (CPI) measure of inflation could hit 3% in the coming months.
The CPI rate jumped from 2.4% in April to 2.7% last month, the Office for National Statistics announced earlier this week, a figure much higher than the Bank’s 2% target.
Despite its concerns, the MPC has suggested the UK could soon see a “slow but sustained recovery in growth”.
Copyright Press Association 2013