THE Bank of England's Monetary Policy Committee was unexpectedly unanimous in its vote to hold, rather than increase, quantitative easing at new Governor Mark Carney's first meeting in the chair, it has emerged.
However, even though Paul Fisher and David Miles abandoned their call for an immediate £25 billion increase in QE to £400bn, minutes of the July 3 and 4 meeting highlighted the view of some MPC members that further monetary stimulus was warranted given the weakness of recovery.
The minutes, published yesterday, showed unanimous votes to hold QE at £375bn and keep base rates at their record low of 0.5%. They also signalled any rise in interest rates is a long way off.
The minutes were also viewed by economists as signalling the MPC was likely to decide next month to move to providing guidance on future monetary policy.
Mr Fisher and Mr Miles had, in the months leading up to the July meeting, voted along with former Bank Governor Sir Mervyn King for an immediate increase in QE, which is aimed at stimulating activity by boosting money supply through the purchase of Government and corporate bonds using central bank reserves.
The MPC, prior to this month's meeting, had not been of one mind on policy since last October. Mr Miles started voting for a £25bn rise in QE in November last year.
The prospect of forward guidance on interest rates was welcomed by the Confederation of British Industry.
Stephen Gifford, director of economics at the CBI, said: "The MPC minutes show that the committee has unexpectedly parked further asset purchases and now seems unanimously in favour of clear forward guidance.
"Businesses would support clear forward guidance, which has the potential to improve the resilience of financial markets to further shocks and increase the effectiveness of monetary policy."
He believed clarity about the future path of monetary policy could "underpin investment and consumer spending".
Howard Archer, chief UK economist at consultancy IHS Global Insight, said: "We suspect that Mr Carney and his MPC colleagues will want to ram home the message that any tightening of monetary policy is a very long way off.
"To this end, we have little doubt that the Bank of England will adopt a policy of forward guidance on interest rates in August.
"We believe the Bank is likely to adopt economic thresholds to support this policy, perhaps relating to unemployment levels."
The minutes note that any announcement regarding implementation of thresholds and forward guidance would be made alongside publication of the Bank's quarterly inflation report on August 7, rather than immediately after the MPC's next monthly policy meeting on August 1.
The MPC, on July 4, issued a statement highlighting its view that the implied increase in the expected future path of Bank Rate, based on a significant rise in market interest rates, had not been warranted by recent developments in the domestic economy.
In spite of the change of vote from Mr Fisher and Mr Miles this month, some economists still expect further loosening of policy next month when the MPC makes its decision on the basis of updated inflation projections.
Referring to the views of those MPC members who believe that further stimulus is warranted, the minutes state: "Domestic activity was recovering as quickly as envisaged in the May inflation report, but the pace remained too slow to begin to close the economy's margin of spare capacity."
Expanding on these views, the minutes add: "An expansion of the asset purchase programme remained one means of injecting stimulus, but the committee would be investigating other options during the month, and it was therefore sensible not to initiate an expansion at this meeting.
"Given the already large size of the asset purchase programme, there was merit in pursuing a mixed strategy with regards to the different policy instruments at the committee's disposal."
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