On the 5th of July, the Bank of England decided restart its asset purchase programme by announcing an additional L50 billion of asset purchases, to a total of L375B. The Minutes of the meeting show that 7 members voted in favour of the proposition to finance a further L50 billion of asset purchases by the issuance of central bank reserves. Two members (Dale & Broadbent) on the contrary preferred to maintain the stock of asset purchases at L325B.
The Monetary Policy Committee believed that the near-term outlook for growth had weakened and added that it now seemed possible that output would be roughly flat over 2012 as a whole. While there were risks to medium-term inflation in both directions, developments since the previous meeting meant that the upside risk had declined. The Minutes showed that members discussed the case for increase by either L50 billion or L75 billion, but decided that in the light of potential stimulus provided by other recent and prospective policy initiatives; an additional L50 billion was appropriate at the July meeting.
Remarkably, also the case for a cut in the Bank Rate was discussed as the MPC said the impact of FLS (Funding for Lending Scheme) and other policy initiatives might in time alter the Committee’s assessment of the effectiveness of such a rate reduction. There are some surprises in the minutes, first of all that two members voted against an increase in the amount of asset purchases, but second also that the BoE keeps the door open for a rate cut.