Commenting on the Monetary Policy Committee (MPC) minutes for February 2012 published today by the Bank of England, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said:“As expected, the decision by the MliPC to maintain interest rates at 0.5% was unanimous. But there was a surprising split on the decision to increase Quantitative Easing (QE), with seven members voting for a £50bn rise and two members voting for £75bn. Those supporting a larger QE increase (of £75bn) did so because there is a risk of a prolonged period of depressed demand in the economy. However, we believe the majority were right in restricting the increase to £50bn, as there are signs that the domestic economy is improving slightly and the eurozone threats are now less acute.
“Despite the split vote, the minutes do not give a clear signal about the likelihood of further QE increases. Expectations that the programme will be raised further are premature at this stage, but we feel that QE would be more effective if the MPC also purchased private sector assets, rather than focusing exclusively on gilts. In the upcoming Budget, we urge the government to reallocate priorities within its deficit-cutting plan and announce a package of measures to boost business growth.”