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Bank Of England Minutes Reveal 7-2 Split Remains

James Boston
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Bank Of England Minutes Reveal 7-2 Split Remains

The publication of the minutes of the Bank of England’s (BoE) recent Monetary Policy Committee (MPC) meeting brought little by the way of surprise. The outcome of the meeting itself was very much to maintain the status quo in terms of interest rates and the quantitative easing balance. Once again this month seven of the nine members voted for now monetary action while two, Ian McCafferty and Martin Weale, voted in favour of a 25 basis point hike. These two members have been seeking monetary tightening consistently since the August meeting but there was speculation that this month they might re-join the majority, particularly in light of the slight moderation in UK growth rates. Speaking yesterday, McCafferty noted that the he was beginning to harbour concerns around the Eurozone’s slowdown and it’s resultant effect on the British economy but he did not however believe that a sharp recession for the bloc was imminent, McCafferty also highlighted the fact that the Bank’s concerns around the overheating in the housing market are now easing. It transpires that neither of these two factors were enough to influence the votes of the two dissenting MPC members.

Yesterday’s inflation data for the UK confirmed that the price index was well clear of the Bank’s 2% target level, and that at least in the short term it was showing no signs of picking up in it’s rate of expansion. This, combined with some on going slack in the labour markets as evidenced by the lack of wage growth buys the Monetary Policy Committee enough scope to maintain it’s loose monetary stance at least into next the first half of next year. The Committee, in today’s minutes hinted at the fact that fourth quarter GDP growth would likely be on the more moderate side of expectations, this however needs to viewed in the context that the UK traditionally brings in slower growth in it’s final quarter.

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