MPC Meeting Minutes Show Unanimous Agreement

The Bank of England published earlier today the minutes from its last MPC meeting held on September 6. The minutes show that all nine committee members agreed upon the decision to hold interest rates unchanged at 0.50% and to leave the current asset purchase program at the £375bn.

The committee unanimously voted to keep the current policy unchanged, even though there were some members in favour of an additional package being announced at the meeting instead of delaying incremental asset purchases. The committee clearly signalled however that additional asset purchases may be in store at the next meeting.

The committee stated that it is concerned with the current international economic environment, especially the recession being faced in the EU and the slowing being experienced by emerging economies like India, China and Russia, all of which may contribute to a decrease in the pace of growth experienced worldwide and so press down additionally on the British economy.

GDP growth is seen improving in the third quarter but the MPC expressed some concern about this being sluggish given the direction of many indicators recently that although showing some improvement are still somewhat moribund. According to the report, the latest manufacturing, retail sales, and even jobs data have been better than initial estimates, but not enough to boost GDP.

For now, the committee believes inflation is not a major concern as the RPI measure decreased from last year’s heady rate of 5% to 2.5% at the last count. In any case, the committee admits it will take time to lead inflation back down towards the long-term 2% target and so it was used as the basis to delay additional monetary easing. Supply side problems in commodities have been dominating the price of commodities with oil alone higher by 8% in the month of August.

The pound was punished on the MPC minutes as the prospects for further easing has a negative effect. With the ECB, the Federal Reserve, and, last night, the BOJ, all engaging in monetary easing, the likelihood for the BOE joining the printing party is now all  but certain.