BoE splits three ways for 3rd month as price con­cerns grow

The Pak Banker - - Front Page -

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

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