Bank of England split on more QE as Governor Mervyn King over-ruled

Bank of England split on more QE as Governor Mervyn King over-ruled

The Bank has said it would tolerate the inflation overshoot, but few economists expected the MPC to encourage it. They had expected Mr Miles to be the only policymaker calling for more QE, so the decisions of both Sir Mervyn and Paul Fisher, the Bank’s executive director for markets, to join him raised the prospect of action next month.

He added that more QE “may be needed if growth fails to gather momentum”, calling for more infrastructure spending – in particular on energy and housebuilding – and to reform corporation tax “to stop multinationals shifting their profits offshore”. He also urged business “with support from government, to be more ambitious abroad, especially in high-growth emerging countries”.

The minutes showed that the Bank had considered a wide variety of policies in the February meeting, including a possible extension of the Funding for Lending (FLS) cheap credit scheme to “non-bank lenders”. Using QE to buy assets other than gilts and a reduction in interest rates below 0.5pc were discussed and, once again, dismissed.

Other “potential policy measures” that would involve the Bank acting with either the Treasury, like the FLS, or the Financial Services Authority, such as current plans to strengthen banks’ capital positions, were countenanced as well.

The MPC also appeared to push the Treasury to do more for growth. “A number of more targeted interventions to boost demand and the supply capacity of the economy might be entertained, but many of these fell to other UK authorities,” the committee said.

Ed Balls, the shadow chancellor, said the words were “a clear message to George Osborne to act”.

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