AFP – Britain’s recession-hit economy remained on course for more cash stimulus despite an improved employment backdrop, minutes from the Bank of England’s latest monetary policy meeting showed Wednesday.
Minutes from the BoE’s meeting at the start of August revealed that all of the central bank’s nine policymakers voted to keep interest rates at a record-low 0.50 percent.
They also voted unanimously to keep the central bank’s quantitative easing (QE) cash stimulus programme at a level of £375 billion ($584 billion, 476 billion euros).
But the decision to refrain from more QE cash was “finely balanced” for some members of the bank’s nine-strong Monetary Policy Committee (MPC), showed the minutes published amid a worsening recession for Britain.
A positive for Britain came Wednesday in the form of an improving jobs market. Official data showed the country’s unemployment rate fell to 8.0 percent in the quarter to June from 8.1 percent in the three months to May thanks to an Olympics jobs boost.
The number of unemployed people fell by 46,000 to 2.56 million, the Office for National Statistics added in a statement.
Thousands of temporary jobs were created as a result of the London Olympics that ended on Sunday — providing a boost to Britain’s recession-hit economy.
“Although these numbers may have been helped a little by the Olympics, the broad story is that the labour market continues to outperform the economy, which official data show has been declining for three quarters,” said Investec bank analyst Philip Shaw.
But amid rising inflation and negative gross domestic product (GDP) output in Britain, Shaw said he felt the “MPC will give the green light for another £50 billion of QE, most likely when the current programme expires in November.”
The MPC had already voted in July to increase the QE asset-purchasing programme by an extra £50 billion over four months to November — bringing the total to £375 billion since it began the stimulus programme in 2009.
The committee maintained the status quo in August as it also sought to gauge the impact of the government’s £80-billion ‘Funding for Lending’ (FLS) scheme that is also aimed at lifting retail bank lending.
Under QE, the BoE creates new cash to purchase assets such as government and corporate bonds with the aim of boosting lending and stimulating economic activity.
“The committee discussed whether it was appropriate to expand or continue with the programme of asset purchases it had agreed at its previous meeting,” the minutes read.
“Inflation was still slightly above 2.0 percent but likely to remain close to the target in the coming months.
“The level of underlying activity was perhaps not as weak as the GDP data for the second quarter had suggested and, with the squeeze on real incomes beginning to ease, some recovery in spending was probable.”
The minutes continued: “For most members, the decision this month was relatively straightforward.
“Over the coming months, the committee could take stock of the impact of the FLS and the implications this had for other potential policy options.
“For some members the decision was nevertheless more finely balanced, since a good case could be made at this meeting for more asset purchases.”
The BoE added that recent indicators for the manufacturing and services industries had been weak, suggesting GDP output would remain under pressure between July and September after the economy contracted in the second quarter of 2012.
“Admittedly the vote to leave policy unchanged this month was unanimous, but this was always likely given the asset purchases currently underway won’t be completed until November,” she added.