November 8, 2012 / 12:22 PM / 5 years ago

Instant View: Bank of England votes against more stimulus

LONDON (Reuters) - The Bank of England opted on Thursday against pumping more cash into the fragile economy, with policymakers hoping a new scheme will boost lending and some worried about inflation.

Following are reactions to the decision:


”Fears about the limits to monetary policy appear to have dominated thinking at the Bank of England (BoE) who today voted to keep policy on hold, as we had expected.

”Weak productivity growth, continued above target inflation and worries about the efficacy of further asset purchases probably worked against the case for more stimulus.

“We do not think today’s decision marks the last of UK policy easing. The BoE could loosen policy settings further next year. The economy needs the boost.”


”Up until last month, analysts had placed a 70 percent chance on an expansion of QE, but a bounceback in UK GDP, ongoing employment gains, good US data, signs of recovery in China and the aggressive ECB response to the Eurozone crisis had seen these expectations plummet to just 40 percent last week.

With risk appetite having picked-up and the Funding for Lending Scheme showing tentative signs of boosting lending capacity the BoE clearly felt there was little need to offer more stimulus. Several members have been sounding more skeptical on QE’s effectiveness anyway.

”The underlying story essentially remains one of economic stagnation. Third-quarter GDP was boosted by one-off factors and recent business surveys, such as the purchasing managers’ indices, are pointing to softer growth in the months ahead.

”Likewise, while employment numbers have been a real source of optimism the recent news flow on job losses in financial services, manufacturing and retail has all been undeniably grim.

”Additionally, the external environment will remain a drag.

“This is why we don’t believe the Bank of England is finished with its stimulus efforts.”


”The MPC’s decision to keep monetary policy on hold reflects a stabilization in the economic outlook and various upside inflation influences such as rising utility tariffs and higher university tuition fees.

“Indeed the CPI profile in next week’s Inflation Report should make it clear why the committee opted not to ease policy. While we may not have seen the last of QE, more hopes are being pinned on the Funding for Lending Scheme. This suggests there will be no more QE at least for a while.”


”The MPC’s decision to leave policy on hold today would not have been an easy one and the vote could have been quite close.

“We think that more policy stimulus will be required in the coming months - the question is whether the Committee feels it has the tools to deliver it.”


”We suspect that the Bank of England’s decision to hold off from further stimulus at the November MPC meeting may very well have followed a very close vote within the committee.

”We are doubtful that the decision marks the end of Quantitative Easing given that recovery currently looks fragile, feeble and far from guaranteed.

”Indeed we expect another, and likely final, 50 billion pound of QE to be enacted in the early months of 2013.

”Furthermore, we would not rule out further QE as soon as December if data and survey over the next few weeks increasingly point to renewed GDP contraction in the fourth quarter.

“Meanwhile, we remain firmly of the view that interest rates will not go below 0.50 percent. However, we do not expect any increase in interest rates for at least another two years.”


”It is likely that some recent positive economic data and deepening skepticism within the MPC about the effectiveness of further gilt purchases have tipped the balance in favor of keeping policy on hold this month.

“Though we expect a modest pick-up in economic momentum through 2013, further QE remains on the table should conditions deteriorate, particularly if ongoing risks in the global economy remain unresolved.”

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