Mervyn loses his Talons

The Minutes from the Bank of England’s Monetary Policy Committee meeting of two weeks ago were released earlier today. They show that the motion to increase the Quantitative Easing program by £50bn was carried with a vote of six to three. Interestingly, Governor Mervyn King was one of the dissenters. Not too long ago one would have assumed that this would have been due to him worrying that inflation is about to pick up and that he would therefore be reluctant to increase the monetary stimulus further. In fact quite the opposite is true.  King and the other two dissenters (Beasley and Miles) actually voted against the £50bn, as they wanted to increase it by £75bn (which would have taken the total programme to £200bn). This is a quite a departure from the previously hawkish Governor, who, it was reported in the New Statesman, opposed the 1.5% rate cuts of late last year. I guess it remains to be seen if once again he’s a little late to the party or he has now managed to get himself ahead of the curve.  Bear in mind however that the increase in QE was announced before the unexpectedly sticky UK inflation data…

The value of investments will fluctuate, which will cause prices to fall as well as rise and you may not get back the original amount you invested. Past performance is not a guide to future performance.

Matthew Russell

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