BoE splits three ways for 3rd month as price concerns grow
LONDON: Bank of England policy makers split three ways for a third month on the need for economic stimulus as some officials became more concerned that Britain's bout of inflation may persist.
Adam Posen kept up his demand to increase the 200 billion-pound ($309 billion) bond-purchase plan by 50 billion pounds, according to minutes of the nine-member Monetary Policy Committee's Dec. 9 decision released by the central bank today in London. Andrew Sentance voted to raise the interest rate for a seventh month and the rest ensured no change in policy.
The majority "stood ready to change the stance of policy should the balance of risks shift materially," the minutes said. "Most of those members considered that the accumulation of news over recent months had probably shifted the balance of risks to inflation in the medium term upwards."
The U.K. inflation rate unexpectedly accelerated to a six-month high in November, above the government's 3 per- cent limit. While Bank of England Deputy Governor Charles Bean last week said the strength of inflation has increased the risk to price expectations, Posen said the bank shouldn't "overreact" to it. The pound was little changed after the report and data from the Office for National Statistics showing economic growth slowed more than initially estimated in the third quarter. The currency traded at $1.5453 as of 9:34 a.m. in London. The benchmark two-year government bond was down 1 basis point today at 1.183 percent.
Posen said at this month's decision that there was a "significant" margin of slack in the economy, that "would probably act to push inflation well below target in the medium term in the absence of further measures to stimulate demand."
Sentance kept up his campaign to raise interest rates as part of a "gradual" withdrawal of stimulus. He wants to increase the benchmark by 0.25 percentage point to 0.75 percent. -PB News