LONDON (Reuters) - The Bank of England is close to launching a new round of monetary stimulus because of the worsening euro zone crisis, according minutes of its last policy meeting, which showed officials split 5-4 on the move, with Governor Mervyn King in favor.
The U.K.’s recovery is dividing former Bank of England policy makers over the timing of Mark Carney’s first rate increase as governor of the central bank.
While the Monetary Policy Committee kept its benchmark rate at a record low today, speculation among forecasters is mounting that it is on the verge of a split. Echoing that debate, Andrew Sentance insists the panel should have started increasing borrowing costs already, while Sushil Wadhwani says it must wait as the economy uses up spare capacity.
Finance minister George Osborne tweaked the central bank’s mandate two weeks ago, giving it stronger backing to continue ignoring inflation when it overshoots its target due to one-off factors, reports The Telegraph.
But only a handful of economists polled by Reuters last week expect the central bank to add this month to the £375bn of government bonds it bought between March 2009 and October 2012.
The Bank of England is on the verge of approving another round of monetary stimulus, with Governor Mervyn King supporting an extra £50bn of gilt purchases, minutes to its June 6-7 policy meeting showed on Wednesday.