BoE Monetary Policy Committee Members Unanimous In Keeping Interest Rate, QE Steady; Unemployment Threshold Not A 'Trigger'

The minutes of the September meeting of the Bank of England’s Monetary Policy Committee showed that the members voted unanimously to keep both interest rates and its asset-purchase program steady, in contrast with economists’ expectations that a minority of the members would voice support for more stimulus measures to boost the economy.

The nine-member MPC kept interest rates at a record low of 0.5 percent in early September, while the pace of the asset-purchase program was kept unchanged at 375 billion pounds ($596.48 billion), the minutes published Wednesday showed. Economic data released in August and September reinforced signs of a sustained recovery in the nation’s economy, and the minutes showed that no member advocated for further stimulus measures.

“Over the month, the evidence was consistent with a recovery at least as strong as that expected at the time of the August Inflation Report. Were the recovery to falter, the case for further asset purchases would be stronger. But no member judged that further stimulus was appropriate at present,” the minutes stated.

Analysts had expected the members to differ on the pace of quantitative easing, or QE, program and on the Bank’s forward guidance.

“September’s minutes may show that one or two MPC members voted to resume the asset purchase program. Granted, the economic data have gone from strength to strength since August meeting. But some members may have been disappointed by the initial impact of forward guidance," Samuel Tombs, an economist with Capital Economics, wrote in a research note ahead of the release of the minutes.

The MPC members also agreed that none of the three conditions it placed for the continuance of its forward guidance on interest rates were breached during the month, and hence, the committee noted that the guidance from August held good for September.

“Unemployment remained above the 7 percent threshold. In that light, the guidance remained in place and no MPC member thought it appropriate to tighten the stance of policy at the current juncture,” the minutes showed.

In August, the MPC had issued a forward guidance to keep interest rates steady at least until the unemployment rate dropped to 7 percent, subject to inflation staying under control.

However, the committee noted that the forward guidance by the Bank had resulted in economists and the markets giving increased attention to the unemployment data, and the members agreed that there is a need to emphasize that the “threshold for the unemployment rate was not a ‘trigger’ that was mechanically linked to subsequent movements in Bank Rate.”

“Rather, MPC members judged it to be a sensible point, in the absence of any of the knockouts being breached, to reassess the outlook for inflation and growth drawing on all of the relevant factors and data, much as the Committee had always done,” the minutes added.