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Splits In The Boe


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HOLA441

http://www.dailyfx.com/real_time_news/#ixzz0luV8JSzg

BOE SENTANCE VOTED TO RAISE KEY RATE BY 0.25% TO 0.75%

BOE VIEW REMAINS THAT CPI WILL FALL BACK TO TARGET

BOE POSEN VOTED TO INCREASE BOND PLAN BY 50B POUNDS

BOE: SOME MEMBERS THOUGHT THE NEED FOR MORE STIMULUS HAD INCREASED

BANK OF ENGLAND VOTED 7-1-1 TO MAINTAIN RATE AND KEEP BOND PURCHASES AT 200B POUNDS

Minutes:

http://www.bankofengland.co.uk/publications/minutes/mpc/pdf/2010/mpc1010.pdf

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Forex factory says 1-0-8

Then Forex Factory is wrong - read the minutes:

32 Committee members differed in the significance they ascribed to these developments on the

overall balance of risks to the medium-term outlook for activity and inflation since the August

Inflation Report. Most members felt that the balance of risks had not altered sufficiently to warrant a

change in the policy stance at this meeting. On the one hand, they continued to believe that the

economy contained a considerable margin of spare capacity and, therefore, that demand could expand

significantly before widespread capacity constraints put upward pressure on inflation. On the other

hand, there were concerns about the risks to inflation expectations from the persistent and prospective

above-target inflation outturns. The risks to inflation in either direction remained great, and these

members stood ready to alter the policy stance in either direction as the balance of risks became more

decisively tilted in one direction or the other. Some of those members felt the likelihood that further

monetary stimulus would become necessary in order to meet the inflation target in the medium term

had increased in recent months. But, for them, the evidence was not sufficiently compelling to imply

that such a course of action was necessary at present. The analysis and projections prepared for the

November Inflation Report would give the Committee an opportunity to re-evaluate more thoroughly

the outlook for activity, the margin of spare capacity and inflation in light of all the news.

33 For one member, the accumulated evidence since the Committee had completed its £200 billion

programme of asset purchases suggested that a further expansion in that programme was now warranted.

In this member’s view, the current degree of spare capacity in the economy was

sufficiently large that monetary policy could afford to encourage more rapid growth without risking an

undesirable increase in underlying inflationary pressures. Absent such additional stimulus, inflation

would fall well below the target in the medium term. And the stability of measures of inflation

expectations and wages over several months indicated that the likelihood of their rising sufficiently to

cause an overshoot of the inflation target in the medium term was smaller than previously feared. For

this member, an increase in the size of the asset purchase programme at this meeting would reduce

both the risk of inflation falling materially below the target after the temporary factors that were

boosting it had dissipated, and also the risk that a period of subdued growth would have a

self-reinforcing effect diminishing the supply capacity of the economy.

34 Another member continued to take the view that it was appropriate to begin to withdraw some of

the exceptional monetary stimulus that had been provided by cutting Bank Rate to 0.5% alongside the

Committee’s programme of asset purchases. Although some slowdown in growth might be occurring

in the United Kingdom and overseas, this had to be seen alongside the strong momentum of growth in

the first half of the year. The pace of growth was bound to be variable at early stages of the recovery.

Meanwhile, inflation remained above the target and could increase further with upward pressure from

a higher standard rate of VAT and rising oil and other commodity prices. In the view of this member,

by failing to respond to persistent above-target inflation, which was forecast to continue for some time,

the Committee risked a loss of credibility that would be damaging to business and consumer

confidence over the medium term.

35 The Governor invited the Committee to vote on the proposition that:

Bank Rate should be maintained at 0.5%;

The Bank of England should maintain the stock of asset purchases financed by the issuance

of central bank reserves at £200 billion.

Seven members of the Committee (the Governor, Charles Bean, Paul Tucker, Spencer Dale, Paul

Fisher, David Miles and Martin Weale) voted in favour of the proposition. Two members of the

Committee voted against the proposition. Adam Posen preferred to maintain Bank Rate at 0.5% and

increase the size of the asset purchase programme by £50 billion to a total of £250 billion. Andrew

Sentance preferred an increase in Bank Rate of 25 basis points, and to maintain the size of the asset

purchase programme at £200 billion.

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