BoE MPC divided further

We do get some hints on division in RBI’s TAC, but nothing compared to divisions in BoE’s MPC. In the recent meeting in Feb 2011, there were 4 dissents compared to 3 in Jan-11 meeting:

Regarding Bank Rate, six members of the Committee (the Governor, Charles Bean, Paul Tucker, Paul Fisher, David Miles and Adam Posen) voted in favour of the proposition. Three members of the Committee voted against the proposition. Andrew Sentance preferred to increase Bank Rate by 50 basis points. Spencer Dale and Martin Weale preferred to increase Bank Rate by 25 basis points.

Regarding the stock of asset purchases, eight members of the Committee (the Governor, Charles Bean, Paul Tucker, Spencer Dale, Paul Fisher, David Miles, Andrew Sentance and Martin Weale) voted in favour of the proposition. Adam Posen voted against the proposition, preferring to increase the size of the asset purchase programme by £50 billion to a total of £250 billion.

In Jan-11 meeting, dissidents were Sentance and Weale (for  hiking rates by 25 bps each) and Posen (who wanted to increase asset purchase program by GBP 50 bn).  

For three members, the case for removing some monetary stimulus at this meeting was compelling. For those members, the upside risks to the medium-term inflation outlook from global inflationary pressures and the possibility that inflation expectations would move up outweighed the downside risks to inflation associated with uncertainty about the strength of the recovery and the possibility of persistent spare capacity. In part, this reflected a concern that the level of demand consistent with achieving the inflation target might be lower than previously thought. Two of those members favoured only a small tightening in policy, given the uncertainty about the economic outlook.

The third member concluded that a larger reduction in the degree of monetary stimulus had now become appropriate. That member thought that there was mounting evidence that firms were able to pass on cost increases to the prices they set and noted also that nominal domestic demand had been growing for some time at near to the top of its typical range prior to the recession. In that member’s view it was significantly more likely than not that inflation would overshoot the inflation target in the medium term.

All these dissents, along with criticism on Mervyn King’s recent moves makes BoE the most exciting central bank to watch  and track.

 

 

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