MPC Dilemma
Bank of England rate-setters discussed easing monetary policy for the first time since February, minutes of their July 7-8 meeting showed yesterday, reflecting growing concerns about Britain's economic prospects. The Monetary Policy Committee's first meeting since the austere emergency budget last month produced the expected 7-1 split in favour of keeping rates at a record low 0.5 percent, as lone hawk Andrew Sentance maintained his call for a 0.25% point rise in rates. More of a surprise to economists was the MPC's downbeat tone on growth, and the fact that arguments for a "modest easing" in monetary policy, in practice, an increase to the 200 billion pounds of quantitative easing already pumped into the economy, were discussed alongside the case for a "modest tightening". The MPC faces a dilemma. UK inflation is still well above its 2% target after hitting a 17-month high of 3.7 percent in April. But the nascent economic recovery looks increasingly fragile as fiscal austerity becomes the watchword across much of Europe.
22 / Jul / 2010