By TraderVox.com
Tradervox.com (Dublin) – The Bank of England officials have voted to continue with the current round of stimulus as fears about the inflation risk surged. Officials are split on whether to make additional stimulus after the current stimulus is completed this month. The nine-member Monetary Policy Committee left the stimulus package unchanged at 375 billion pounds. The 50-billion-pound additional stimulus made in July will have been completed by the time they meet next month. The Policy Committee will be grappling with the decision on whether to make additional stimulus amid the rising commodity costs.
Ben Broadbent, a BOE policy maker, indicated that the capacity for the BOE to make additional quantitative easing is hindered by the faster-than-expected inflation. These comments seem to put weight to Spencer Dale’s comment that a prolonged loose monetary policy risked putting the economy in an inflation crisis. Dale is a Chief Economist in London. According to Philip Shaw, an Economist in London at Investec Securities, the next BOE meeting will be against a background that will make the Monetary Policy Committee to think a bit harder on whether more QE is necessary. He further projected that the MPC will make another 50-billion pound additional stimulus while admitting that the “decision could be a close call.”
The MPC seems split on whether the risk of more stimulus is worth taking, considering the continued pressure on prices. In an interview last week, Deputy BOE Governor Paul Tucker questioned whether additional stimulus is necessary, saying while the QE works, it sometimes fails to produce the desired results as it used to. The minutes of today’s BOE meeting will be released on Oct 17, when we will know how each member of the MPC voted. UK inflation dropped in August to 2.5 percent with a forecast of 2.1 percent being expected by the BOE in the first quarter next year. The Bank expects to reach its goal of 2 percent by the end of next year.
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