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.
There is not an ability of central banks to take all these risks out or set the seeds for a sustainable recovery
Bank of Canada Governor Mark Carney, urging central banks to secure “escape velocity” for their economies, said there is still room for more monetary stimulus around the world if needed.
In comments that may shed light on his thinking as he prepares to take over the Bank of England in July, Carney said policy in developed countries isn’t “maxed out” and that central bankers can be flexible in meeting inflation goals.
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.
Several Federal Reserve policymakers wanted to drive home the idea that their asset-purchase program would be trimmed in predictable, US$10-billion steps unless there is a big economic surprise this year, according to minutes of their last meeting.
Minutes of the Fed’s Jan. 28-29 policy meeting, released on Wednesday, showed the officials were nearing a decision on how to adjust a promise to keep interest rates low for a while to come, including the possibility of incorporating financial stability concerns in that promise.