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BOE eyes to inject more funds
Source: Agencies |
September 22, 2011, Thursday
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Print Edition
Print Edition
THE outlook for the British economy is weakening so quickly that the Bank of England yesterday signaled it was ready to pump in more money, potentially as soon as October.
Minutes from the bank's September meeting showed most policymakers believed the stresses of the past month had boosted the case for an "immediate" return to the policy of quantitative easing.
It also discussed cutting its already low interest rates.
Action to support the economy would be welcomed by the Conservative-led coalition after figures showed higher government spending and weak tax receipts drove public sector net borrowing to a record high for the month of August.
Treasury minister Danny Alexander insisted that the government was sticking to its austerity program after reports that ministers were looking at investing an extra 5 billion pounds (US$7.82 billion) on capital projects to ward off fears the economy could go back into recession.
With interest rates at a record low of 0.5 percent, attention is focusing on whether the BOE will revive its program of asset purchases after spending 200 billion pounds in 2009-10, mainly on buying gilts, to help drive down borrowing costs for business.
At the meeting, Adam Posen remained the only one to vote for an additional 50 billion pounds in asset purchases.
But the minutes showed most members of the Monetary Policy Committee thought it was likely that more asset purchases would become warranted at some point.
"For most members, the decision of whether to embark on further monetary easing at this meeting was finely balanced since the weakness and stresses of the past month had significantly strengthened the case for an immediate resumption of asset purchases," the minutes said.
"For some members, a continuation of the conditions seen over the past month would probably be sufficient to justify an expansion of the asset purchase program at a subsequent meeting."
Sterling fell to an eight-month low against the dollar while gilts rose after the data.
The minutes said that those voting for an unchanged policy in September had seen some merit in waiting to see how actions taken by overseas authorities would develop.
Minutes from the bank's September meeting showed most policymakers believed the stresses of the past month had boosted the case for an "immediate" return to the policy of quantitative easing.
It also discussed cutting its already low interest rates.
Action to support the economy would be welcomed by the Conservative-led coalition after figures showed higher government spending and weak tax receipts drove public sector net borrowing to a record high for the month of August.
Treasury minister Danny Alexander insisted that the government was sticking to its austerity program after reports that ministers were looking at investing an extra 5 billion pounds (US$7.82 billion) on capital projects to ward off fears the economy could go back into recession.
With interest rates at a record low of 0.5 percent, attention is focusing on whether the BOE will revive its program of asset purchases after spending 200 billion pounds in 2009-10, mainly on buying gilts, to help drive down borrowing costs for business.
At the meeting, Adam Posen remained the only one to vote for an additional 50 billion pounds in asset purchases.
But the minutes showed most members of the Monetary Policy Committee thought it was likely that more asset purchases would become warranted at some point.
"For most members, the decision of whether to embark on further monetary easing at this meeting was finely balanced since the weakness and stresses of the past month had significantly strengthened the case for an immediate resumption of asset purchases," the minutes said.
"For some members, a continuation of the conditions seen over the past month would probably be sufficient to justify an expansion of the asset purchase program at a subsequent meeting."
Sterling fell to an eight-month low against the dollar while gilts rose after the data.
The minutes said that those voting for an unchanged policy in September had seen some merit in waiting to see how actions taken by overseas authorities would develop.
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