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    20 June 2012| last updated at 09:48PM

    Bank of England votes narrowly against more QE stimulus



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    LONDON: Bank of England policymakers voted 5-4 against pumping Britain’s recession-hit economy with more new cash under its Quantitative Easing (QE) programme, minutes of a meeting showed on Wednesday.

     

    BoE Governor Mervyn King and three other central bank members voted earlier  in June for more stimulus — up to a total of £50 billion (62 billion euros,  $79 billion) — but they were out-numbered by those wishing to sit tight.
     
    All nine members of the Monetary Policy Committee (MPC) meanwhile voted to  leave the BoE’s main interest rate at record-low 0.50 percent, where it has  stood for more than three years.
     
    “Regarding Bank Rate, the Committee voted unanimously in favour of the  proposition” to keep the level at 0.50 percent after ruling out a cut, the  minutes said.
     
    “Regarding the stock of asset purchases (QE), five members of the  Committee... voted in favour” of the status quo.
     
    “While acknowledging that further stimulus was likely to become warranted  at some point, most members noted that there were several key events occurring  over the coming weeks that could have a material bearing on the situation in  the euro area and that there was merit in waiting to see how matters evolved  there,” the minutes added.
     
    The news comes amid hopes of fresh stimulus measures from the US Federal  Reserve. Many on Wall Street were betting that the Fed would on Wednesday  unveil plans to pump more cash into the market to boost the world’s biggest  economy.
     
    Britain’s central bank has injected £325 billion of new money into the  economy since early 2009 — but analysts argue that more is needed because the  country is back in recession. 
     
    “June’s MPC minutes left an extension of quantitative easing within the  next month or two looking even more likely,” said Vicky Redwood, chief UK  economist at the Capital Economics research group.
     
    Under QE, the bank creates new cash to purchase assets such as government  and corporate bonds with the aim of boosting lending and economic output.
     
    The BoE said that King, along with two other MPC members voted to pump out  an additional £50 billion of stimulus, while one member — Paul Fisher —  suggested an increase of £25 billion. 
     
    Despite QE, Britain’s main banks have been reluctant to lend to businesses  and individuals as they seek to repair their balance sheets, triggering the BoE  to last week announce separate stimulus measures.
     
    The Bank of England on Wednesday said it had lent banks £5.0 billion in the  first use of a facility to shield Britain’s financial system from the eurozone  debt crisis. 
     
    The BoE said it allotted the full amount on offer for six-month loans with  an interest rate of 0.75 percent. Wednesday’s auction was the first for the  BoE’s Extended Collateral Term Repo Facility (ECTR) which King activated last  week. 
     
    The BoE, along with the British government, also intends to shortly launch  a “funding for lending” scheme — lasting several years — that would would  offer cheap loans to banks in exchange for a wide range of collateral and on  the condition that they increased lending to small businesses.
     
    Reports said that about £80 billion would be made available under the  scheme, which was also announced last week.
     
    Britain escaped a deep downturn in late 2009 but fell back into recession  in the final quarter of 2011 on the back of state austerity measures and the  eurozone debt crisis.
     
    Britain’s Conservative-Liberal Democrat coalition administration has  slashed public spending and hiked taxes since it won power in 2010, after  inheriting a record deficit from the previous Labour government.
     
    Official data published on Wednesday showed the number of Britons claiming  jobless benefits rose in May, ending two months of declines. But it also showed  that the total of people in employment has hit a three-year high.
     
    The BoE’s main task is meanwhile to use monetary policy as a tool to keep  annual inflation close to a government-set target of 2.0 percent.
     
    Official data published on Tuesday showed British 12-month inflation fell  to a rate of 2.8 percent in May — the lowest level for more than two years. -- AFP

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