Corporate foreign exchange news

MPC driven by uncertain inflation outlook

Thursday, 20 August 2009 09:45:52 GMT

The Bank of Monetary Policy Committee's (MPC's) decision to increase its quantitative easing programme by an additional £50 billion was driven by an unexpectedly uncertain medium-term inflation outlook.
In the minutes for the August policy meeting, the MPC declared that while there were a number of factors that would support inflation in the coming months - such as the past depreciation of sterling against its major counterparts - there was still a pervading downside risk.
The committee stated that the medium-term outlook would "depend crucially on the impact of the recession on supply potential, the responsiveness of inflation to the emerging margin of spare capacity and the extent to which inflation expectations remain anchored around the target".
Responding to this uncertainty, the group voted to increase the asset purchase facility to £175 billion, taking it beyond the £150 billion threshold set by Alistair Darling in April.
However, the decision was not unanimous and it has emerged that the governor of the Bank Mervyn King was overruled in pushing for a £75 billion extension to the quantitative easing programme.ADNFCR-2522-ID-19321531-ADNFCR
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