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Bank split over stimulus package

19 Nov

Bank of England rate-setters were split three ways about the decision taken earlier this month to pump £25bn more into the economy, meeting notes show.

Seven of the nine members of the Monetary Policy Committee (MPC) voted for the £25bn extension, one voted for a higher amount and one for no change.

The members were, however, unanimous in the decision to keep interest rates at a record low of 0.5%.

The Bank has pumped billions into the economy to try to stimulate demand.

Under the programme — known as quantitative easing (QE) — the Bank has pursued a policy of injecting money into the economy through buying bonds from banks and other companies.

The second «no» vote is the more interesting, since it came from the Bank's chief economist, Spencer Dale, who preferred to leave policy unchanged Stephanie Flanders, BBC economics editor Stephanie Flanders on the MPC split

The decision to pump an extra £25bn into the economy brings the total planned spending under the policy to £200bn.

Inflation risk

Minutes of the meeting showed that MPC member David Miles called for the stimulus programme to be extended by £40bn.

This would «provide greater insurance against the downside risks to growth and inflation arising from constrained credit supply,» the notes said.

However, Spencer Dale, the Bank's chief economist, argued that any extension might push inflation higher, and beyond the 2% target. He voted for the programme not to be expanded.

On Tuesday, official figures showed that CPI inflation had risen to 1.5% in October, up from 1.1% in September.