Today, the minutes of the MPC meeting held on 5 th and 6th November was released.
The report said that the Committee discussed the financial market developments; the international economy; money, credit, demand and output; and supply costs and prices before turning to the monetary policy decision.
With regard to financial markets, the report said that the financial market prices had been volatile over the month and also there have
been several policy developments. The US FOMC ended its asset purchase programme, while ECB commenced the purchase of covered bonds as announced earlier.
The yen had fallen to its lowest value against dollar, following the BoJ’s announcement of the increase in the pace of its asset purchase programme.
In contrast, the news in the global economy over the month has been relatively limited, the report added. The news on US activity had
generally been positive with GDP increasing by 0.9% in the third quarter. Euroarea, on the other hand, had consistently remained on the downside over the past six months and quarterly data indicating growth of only 0.2 percent in the second half of the year. Chinese GDP was estimated to have increased by 7.3% in the four quarters to Q3 while inflation had fallen back to 1.6% in September, weaker than market expectations.
Turning to domestic economy, the report said in the second quarter of 2014, there had been a net investment income outflow of around 2
percent of GDP. With regard to inflation expectation, the report pointed out that with a period of inflation below target, it is conceivable that firms’, households’ and financial market participants’ expectation for future inflation may slide downwards.
Projecting future growth rates , the report said that the Committee’s central view was that GDP growth would fall back to its historical average rate in the fourth quarter. As far as inflation is concerned, gradual pickup in productivity growth and declines in slack would return CPI inflation to the 2 percent target.
Coming to the immediate policy decision, the report said, “The Committee set monetary policy to meet the 2% inflation target in the medium term, and in a way that helped to sustain growth and employment.”
The Governor invited the Committee to vote on the propositions that:
· Bank Rate should be maintained at 0.5%;
· The Bank of England should maintain the stock of purchased assets financed by the issuance of central bank reserves at £375 billion.
Regarding bank rate, seven members voted in favour of the proposition, while Ian McCafferty and Martin Weale voted against the proposition, preferring to increase Bank Rate by 25 basis points.
The Committee voted unanimously in favour of the BOE maintaining the stock of purchased assets.
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