All nine Bank of England policymakers voted this month to maintain the £125 billion asset-buying total and keep interest rates at 0.5 per cent, and said August would be a better time to see if policy needed to change.
Minutes of the Monetary Policy Committee's July 8 to 9th meeting showed the key question for them was whether an ”immediate” change in the quantitative easing total was required.
But they judged there had not been enough evidence to justify this and the forecasts prepared for the August Inflation Report would “provide an opportunity to reassess the stock of asset purchases”.
Still, sterling jumped almost half a US cent and gilt futures fell more than 20 ticks as some investors had anticipated a clearer steer on more QE.
“It might mean they don't sanction the extra £25 billion at the next meeting. But it's a close call - unless the data surprises on the downside, I suspect they won't." said George Buckley, chief UK economist at Deutsche Bank.
The BoE has the leeway to take the QE total to £150 billion. Beyond that, it would have to get permission from the government.
The MPC noted that it was the stock of QE purchases that was important for determining the degree of stimulus rather than the flow and agreed that the pace of asset purchases would be slowed to complete the £125 billion total to just before their next meeting.
It judged that the medium-term outlook for the economy had not changed very much since May, though the near-term downside risks to GDP had probably diminished and the immediate inflation outlook may be a little higher.
“A similar set of projections to inflation to May would imply a case for further QE,” said Philip Shaw, chief economist at Investec.
Reuters