Bank of England 'ready to throw more money at economy'
The Bank of England gave its clearest hint yet today that it is ready to crank up the printing presses again amid growing doubts over the health of the recovery.
Minutes of its September meeting showed the Monetary Policy Committee split eight to one in favour of keeping the scale of efforts to boost the money supply at £200 billion and holding interest rates at 0.5%, with Andrew Sentance again the lone hawk pushing for a quarter-point rise.
But the comments revealed that some on the MPC thought "the probability that further action would become necessary to stimulate the economy and keep inflation on track to hit the target in the medium term had increased".
The pound dropped more than half a cent against the dollar to $1.5619 after the minutes were released and hit a two-month low against the euro. Gilts rose as markets bet on another round of quantitative easing from the Bank.
Inflation remains stubbornly above target at 3.1% but the minutes showed committee doves are becoming increasingly vocal over worries that headwinds to a private sector recovery are "somewhat stronger than previously thought" after industry surveys showed faltering growth across manufacturing, construction and services firms last month.
One member argued that slowing growth in the second half of the year after the 1.2% advance between April and June could also prompt businesses which were expecting a faster recovery to shed jobs.
ING Bank's James Knightley said it was "clear that the Bank is prepared to take further action" while Capital Economics economist Samuel Tombs predicted that rate-setters could pump an extra £50 billion into the economy next year when the impact of the Government's deficit-tackling cuts kick in.
Investec chief economist Philip Shaw said: "The broad scenario is that there are big forces pulling in different directions. You have big price pressures from food, clothing and VAT going up next year but against that MPC is concerned about the outlook for growth in the second half. Sentance is looking isolated on the committee."
