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King defeated in final QE vote as MPC sees ‘modest improvement’

  • 19/06/2013
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Bank of England (BoE) governor Mervyn King was defeated in his final bid to inject more stimulus into the UK economy, minutes from last month’s minutes show.

King, who has called on the bank to extend its asset purchasing programme in the past four meetings, again reiterated his desire to pump an extra £25bn into the economy.

However, the BoE committee voted against the proposals 6-3 for the fifth consecutive month, leaving QE unchanged at £375bn.

The six members who voted against further stimulus measures argued further QE is not necessary as economic data points continue to surprise on the upside.

“For most members, the current policy setting was appropriate at this time. The modest improvement in activity on the month had been broadly based,” said the committee.

“This followed a number of months in which the news on activity had been neutral or positive, suggesting that the recovery was becoming more established.”

However, King and two other committee members, argued more QE is needed to reduce unemployment and boost productivity.

“An expansion in demand would probably be associated with a strengthening in productivity growth and would be unlikely to be reflected in higher cost pressures; if faster growth in demand boosted productivity sufficiently, cost pressures could even be lower,” said the committee.

“Additional asset purchases now would allow an earlier normalisation of the monetary stance.”

Earlier this month forecaster Capital Economics said it expects Mark Carney, who takes over as BoE governor this month, to usher in “a new wave of monetary stimulus” despite the presence of the committee’s anti-QE contingent.

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