The Bank of England (BOE) released the minutes from its latest Monetary Policy Committee (MPC) meeting on December 8-9, at which Governor Mervyn King and the MPC voted to leave England’s benchmark interest rate at a record low 0.5%, and its bond-purchase program at 200 billion pounds ($310 billion).
One MPC member, Adam Posen, dissented for dovish reasons though, reiterating his preference to increase the size of the quantitative easing program by £50 billion. Andrew Sentance dissented based on his hawkish view, as he wanted the BOE to commence a withdrawal of monetary stimulus by lifting interest rates 25 basis points to 0.75%.
The minutes did reveal, however, that England’s central bank is becoming increasingly concerned over risks of inflation. While most BOE 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 inflationary risks “had not changed sufficiently to warrant a change in policy.”
The BOE minutes went on to say that “A more significant risk to the outlook for UK activity arising from recent developments within the euro area was the possible impact that a prolonged period of financial market tensions might have upon domestic demand within the United Kingdom. It could hamper the ongoing process of balance sheet strengthening by the UK banks, which could in turn put renewed pressure on the cost and availability of credit to UK households and companies.”