Bank Voted 9-0 To Keep Qe At £175 Bln

[Deckard]

http://uk.reuters.com/article/idUKTRE58M10820090923

LONDON (Reuters) - Bank of England policymakers voted unanimously to keep their asset purchase programme at 175 billion pounds in September, but those who had wanted more in August still felt they had a case, their minutes showed on Wednesday.

All nine policymakers also voted to hold interest rates at 0.5 percent and did not think there had been enough major economic developments to warrant any change to the 50 billion pound expansion of quantitative easing agreed in August.

"For those members who had preferred a larger stimulus at the August meeting, a larger asset purchase programme could still be justified," the minutes said.

"But in the absence of significant news about the medium term the case for adjusting the policy now was outweighed by the benefits of following through with the programme of asset purchases announced in August."

Three policymakers, Governor Mervyn King, Timothy Besley and David Miles, had wanted to increase QE to a total of 200 billion pounds in August. Besley's term on the Monetary Policy Committee ended that month and he was replaced by U.S. academic Adam Posen in September.

"The minutes note the recent improvements in the economic and financial data, but still leave the door open to further policy loosening," said Vicky Redwood of Capital Economics.

Gilt and short sterling interest rate futures dipped after the minutes, which gave no indication that policymakers had discussed cutting the remuneration rate of commercial banks' deposits with the BoE -- an issue raised by King last week in testimony to parliament.

"There does not seem to have been any discussion about cutting the rate paid on banks' reserves -- suggesting that any loosening, at least in the near term, will take the form of extra QE," Redwood added.

Policymakers said the near-term downside risks to growth had lessened over the month and inflation was likely to be higher in the short term than they had thought a month ago.

However, the medium-term inflation outlook had not really changed because of the large amount of spare capacity in the economy.

"Even if GDP had turned positive in Q3, it was unlikely to have reached the point where the level of spare capacity was shrinking. Unemployment continued to rise and was likely to continue increasing for some time."

Policymakers felt that rising asset prices and the weaker pound -- as well as lower gilt yields, market interest rate expectations and interbank lending rates -- would help support nominal spending in due course.

They noted that their preferred measure of broad M4 money supply growth, excluding the holdings of financial intermediaries, had picked up slightly on a three-month basis in July. But bank lending to consumers and companies fell in July.

"Weak credit demand was likely to have been a factor, but so too was restricted supply," the minutes said.

Policymakers also warned that past financial crises had not been resolved quickly and there was a risk of a false dawn.

"High levels of public debt internationally and the persistence of global imbalances remained downside risks to the sustainability of the recovery."

[General Melchett]

'Iceberg! Dead ahead!'

[piece of paper]

"We need more steam!"

p-o-p

[General Melchett]

As myself and others observed several months back, once gubberments start with the printy printy, they tend to find they just cant stop.... damned if they do, damned if they dont (stop, that is).

[FreeTrader]

I think we'll see them go beyond £175bn.

I doubt they'll want to turn off the tap too abruptly. We've only got 5 weeks of QE left under the present allocation, and already gilt yields are pushing upwards. I figure they'll at least go to £200bn and reduce the weekly gilt purchases from £4.2bn per week to around £2bn. That will see them through to January of next year.

[Deckard]

I figure they'll at least go to £200bn

When do you think this is going to happen FT ?

[RandomBear]

When do you think this is going to happen FT ?

The minutes made it very clear that the next proper decision will be taken in November. Everything til then is just speculation.

King still felt that they neede more QE, he just didn't vote for it this time because he didn't see the value in increasing the program in mid-flow.

[FreeTrader]

When do you think this is going to happen FT ?

Almost certainly any decision will be announced on the 5th November because they'll want to coincide it with November's Inflation Report.

[Injin]

The minutes made it very clear that the next proper decision will be taken in November. Everything til then is just speculation.

King still felt that they neede more QE, he just didn't vote for it this time because he didn't see the value in increasing the program in mid-flow.

That's right - absolutely nothings changed.

A fair comparison is if you plan to go on holiday next yea butkeep having meetings about it saying that you haven't packed yet - like that means you aren't actually going.

As this sort of spin is occuring that means it's almost certain more printing will ensue. Theres no reason to dick about otherwise.

Edited September 23, 2009 by Injin

[Concrete Jungle]

Mervyn just gimme one last hit of QE. Just one more I promise thats all I need.

[BalancedBear]

I think King wanted more qe because he felt we would need it, but also because there was a window of opportunity where getting agreement and consensus would be relatively easy as cpi abated through to September.

When cpi rises into the New Year, it will be a harder sell - despite the fact that he will still see a shortage of money in the economy as the problem and will wish to expand the programme.

Undoubtedly the programme will be expanded, but either there will be a lot of wailing and beating of chests as he does so in the light of cpi, or he will delay, resulting in exacerbating the problems he perceives.

Yep, lets go and print as much money as we need, the country will be the richest in the world valued in GBP, but the poorest valued in any other western currency. I really despair at what is going on, the lunatics really are in control for now. For some reason printing money will not effect us, it only matters in other countries. They will not know when to stop, and we will have an even bigger crisis in the future.

Edited September 23, 2009 by BalancedBear

[Wait & See]

Almost certainly any decision will be announced on the 5th November because they'll want to coincide it with November's Inflation Report.

printingpresses, treason and plot.

[MinceBalls]

But but but, I'm told by the CBI that we are going to be back in full swing by xmas and everything the beloved GB has done has been really terrific for the world. How can we print more if everything is now better?

[Ash4781]

http://www.guardian.co.uk/business/2009/se...erest-rates-mpc

The minutes noted the recent improvements in the economic and financial data, but still left the door open to further policy loosening, analysts said.

The MPC thought the near-term downside growth risks had lessened and the asset price recovery could spark a "virtuous upward spiral".

But it said these developments had limited implications for the medium-term inflation outlook, in part because of the large amount of spare capacity that still existed in the economy. The committee was also particularly aware of potential "false dawns".

I've not read the minutes but interesting report of it. If they have their spare capacity calculations off, as has been suggested (I think there was a few threads on it, and press coverage) could get a bit messy.

Edited September 23, 2009 by Ash4781

[grumpy-old-man-returns]

Almost certainly any decision will be announced on the 5th November because they'll want to coincide it with November's Inflation Report.

they have already agreed to have an extra £25 billion as part of those minutes btw. can't remember what name they gave that though.

so it's already £200 billion.

[RandomBear]

they have already agreed to have an extra £25 billion as part of those minutes btw. can't remember what name they gave that though.

so it's already £200 billion.

???

[pharm]

they have already agreed to have an extra £25 billion as part of those minutes btw. can't remember what name they gave that though.

so it's already £200 billion.

The extra was the increase from £150 billion to £175 billion IIRC.

[Agentimmo]

Excellent. If they keep this up for another 24 months or so I'll be able to buy a 2-bed flat in Kensington for about 6 months wages

Zimbabwe here we come !!

[Deckard]

The extra was the increase from £150 billion to £175 billion IIRC.

Yes, I think that's correct