The Bank of England has decided to pump an additional £100bn into the UK economy in a move designed to maintain extremely low government borrowing costs.
The Monetary Policy Committee voted to extend the quantitative easing programme alongside keeping interest rates at the historic low of 0.1 per cent. The amount of fresh stimulus was at the lower end of market expectations.
The vote on interest rates was unanimous while there was a vote of 8 to 1 in favour of increasing QE. Andy Haldane, the BoE’s chief economist voted against, preferring no increase in the amount of assets purchased.
In its monetary policy statement, the BoE said, “a further easing of monetary policy is warranted to meet its statutory objectives” to keep inflation under control although it slowed the pace of asset purchases, expecting only to complete the additional £100bn by the end of the year.
The MPC’s minutes indicated there had been no discussion of lowering interest rates into negative territory with the BoE’s review of the subject still ongoing.
The decision to only complete the new £100bn in purchases by the end of this year means the bank will no longer vacuum up all of the government’s issuance of debt and in effect finance the government deficit, and will be seen as more hawkish than many economists expected.
BoE officials have insisted that they would not continue to print money and buy government debt in the secondary market if there was a rise in inflationary pressure because their concern is to maintain inflation close to the 2 per cent target.
This week, official figures showed consumer prices were 0.5 per cent higher than a year earlier in May, a four-year low in the CPI inflation rate and down from 0.8 per cent in April.
