Minutes from the committee’s meeting earlier this month revealed governor Mervyn King and his colleagues are concerned inflation may remain higher than expected next year.
In the minutes it said: “It was noted that inflation was currently materially above the target and it remained a possibility that it would be slower to fall during 2012 than the pace implied by the committee’s central projections.”
Although the MPC said an expansion of the asset purchasing programme – now at £275bn – could become warranted next year, the committee said as inflation was still above target and likely to rise again in the long run, it had not opted to expand it further in November.
“In the light of the scale of the challenges posed by the domestic and global environments, the likely undershoot of the target was not very large and inflation was in any case projected to be rising towards the end of the forecast period,” it added.
In early October the Bank of England launched a £75bn quantitative easing program, adding to the £200bn worth of gilts already purchased.
The MPC debated whether to increase this against the backdrop of the eurozone crisis, which appears to intensify every week, alongside weak GDP growth in the UK.
British Banker’s Association (BBA) figures, also out this morning, reported a marginal fall in gross mortgage lending to £8bn in October. House purchase approvals are still 16% higher year-on-year, probably driven by buy-to-let lending, it said.
A BBA spokesman said new lending, including credit cards, loans and mortgages remains “subdued” reflecting householder caution.
Alex King, a director at the independent mortgage broker SPF Private Clients, said: “In some ways the debate is no longer about whether the glass is half full or half empty. The level of mortgage lending has been flatlining for so long, the glass has got a tidemark.”
King said the BBA data echoes that of the CML – a slight fall in gross mortgage lending in October but this reflects the average for the previous six months.
“On the interest rate front, the industry can take some small solace from the MPC report. Revealed in its minutes is a decidedly bleak assessment of the economy’s prospects – and a looming menace from the eurozone crisis.
“With the economy so enfeebled and growth prospects so weak, it could easily be two years before the Bank of England dares to put rates up.”
