Bank of England MPC members hint at further QE stimulus

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Bank of England
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Most MPC members want to see how successful the Funding for Lending Scheme is

Some members of the Bank of England's policy setting body were considering voting for more quantitative easing earlier this month, minutes show.

In the end, all nine members of the monetary policy committee (MPC) voted to keep rates at 0.5% and hold quantitative easing (QE) at £375bn.

But the minutes showed some MPC members thought that the QE programme might need to be extended.

They argued the decision not to lift QE this month was "finely balanced".

Under QE, the Bank buys government bonds, hoping to create beneficial knock-on effects for the economy.

In July, the MPC had voted by 7-2 to increase the QE programme by £50bn.

Minutes from the August MPC meeting showed that most members were happy to keep the QE programme on hold for the moment.

The committee wants to see what impact the new Funding for Lending Scheme (FLS) will have.

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Under FLS, the Bank of England is making low-cost funds available to banks and building societies in an attempt to cut borrowing costs and increase lending to business and individuals.

The Bank said it was "encouraging that a number of banks had decided to cut rates on some mortgage and small-business loans", and added that the impact of the scheme could be greater than it had assumed in its latest Inflation Report.

When it came to the vote, most MPC members opted for a policy of wait-and-see.

"For most members, the decision [of no change] this month was relatively straightforward. Over the coming months, the committee could take stock of the impact of the FLS and the implications this had for other potential policy options," the minutes said.

"For some members, the decision was nevertheless more finely balanced, since a good case could be made at this meeting for more asset purchases."

Philip Shaw at Investec said: "It was perhaps at this stage a touch surprising that some MPC members thought there was a finely balanced argument as to whether to expand QE.

"That's an acknowledgement that the flow of economic news has been poor, but also it suggests that the door for further asset purchases is well and truly open."

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