Published September 18, 2013
LONDON – The minority of Bank of England policymakers who had previously seen a strong case for more stimulus backed away from that view in September amid signs of more robust growth, policy minutes showed on Wednesday.
The minutes of the nine-member Monetary Policy Committee showed unanimous support to keep interest rates on hold at 0.5 percent and maintain the 375 billion pound stock of bond purchases, as in previous months.
But in contrast to July and August's meetings, no members saw a compelling case for more stimulus, following August's commitment to keep rates steady at least until unemployment falls to 7 percent, subject to inflation staying under control.
"Over the month the evidence was consistent with a recovery at least as strong as that expected at the time of the August Inflation Report," the minutes said.
"Were the recovery to falter, the case for further asset purchases would be stronger. But no member judged that further stimulus was appropriate at present."
MPC members Paul Fisher and David Miles had voted earlier in the year to restart the central bank's asset purchase program, but had put this call on hold in July and August pending an assessment of the guidance adopted by new governor Mark Carney.
Also absent in the minutes was any discussion of whether the recent rise in British government bond yields was consistent with the central bank's policy outlook - something on which MPC members had disagreed in August.
The central bank simply noted that the rise in short-dated gilt yields could be due to a number of factors, including U.S. market moves, stronger-than-expected British data and potentially the bank's forward guidance policy.
"A final possibility was that the unemployment rate threshold announced by the MPC had been higher than some financial market participants had expected, or that the conditionality attached to the forward guidance - in the form of the three knockouts - had been more stringent," it said.
The central bank said that there were increased signs that economic recovery was taking hold in Britain, helped by stronger than expected growth in the euro zone, but that downside risks from emerging economies had increased.
On inflation, the MPC judged that none of the three criteria that might cause it to suspend its forward guidance on interest rates had been breached.
Although a rise in oil prices might push inflation up in the short-term, the outlook for 18-24 months' time had improved due to a 3.5 percent strengthening in sterling over the month. Public inflation expectations were little changed.
The BoE's long-term goal remains to return inflation to 2 percent, without causing unnecessary volatility in growth. Inflation has exceeded 2 percent since December 2009.
(Reporting by David Milliken and Christina Fincher)