NEW YORK (Forex News Now) – In what is an always-anticipated currency market trading event, the Bank of England released the minutes of the latest meeting of the influential Monetary Policy Committee, revealing a three-way split over future monetary policy in the UK.
According to the latest minutes of the November meeting, the nine members of the MPC – the body in charge of monetary policy in the Bank of England – were split three ways on what to do for the British economy and currency.
Seven members of the MPC voted to maintain the status quo and keep the lending rate at 0.5% – a record low rate that has been in place for months. They also elected to keep the purchase program at 200 billion pounds.
Adam Posen repeated actions in October’s meeting by calling for more quantitative easing, as much as 50 billion pounds worth, while keeping the interest rate unchanged.
Fellow member Andrew Sentance elected to repeat his earlier vote of increasing the interest rate to 0.75%.
The results closely mirror the results of the October meeting, in which the majority of the MPC voted to keep the status quo as is. This time, though, more concern was voiced about the fear of inflation, coupled with fledgling private sector demand.
In a previous address, the Governor of the Bank of England, Mervyn King, expressed concern that inflation was running above the 2.0% target. This was after a CPI report showed a 3.2% rate in October.
According to King, “We have seen significant increases in energy and commodity prices, we saw VAT go up in January of this year, it is due to go up again in January of next year, and of course, perhaps most important of all, the effective exchange rate for sterling has, on average, fallen by 25% from the period in the middle of 2007 to the end of 2007.”
King further expressed that if inflation continues to rise and affect expectations, the MPC would have to act to fight off excessive inflation.
One thing to be gleaned from the MPC’s meeting as far as global forex news is concerned is the absence of a push for lower interest rates or a reduction in the purchase program. This shows that the BOE does not have as many tools available as it once did to positively impact monetary policy. It will be interesting to see how the voting breakout changes with next month’s meeting.