Feb 20 2013
Bank of England Governor Sir Mervyn King called for more economy boosting measures earlier this month after the UK was left on the brink of a triple dip recession.
Minutes of this month's interest rate meeting revealed Sir Mervyn and fellow Monetary Policy Committee (MPC) members David Miles and Paul Fisher wanted another £25 billion in quantitative easing (QE) amid fears for the recovery after the economy shrank by a worse-than-expected 0.3% in the fourth quarter.
But they were outvoted by 6-3 as the MPC decided more targeted measures would be more effective and as the Bank's latest quarterly forecast warned that inflation was set to rise further and remain above-target for at least another two years.
The pound took a hammering after the QE revelations, hitting a fresh seven-month low at 1.53 US dollars and falling nearly 1% to 1.14 euros.
Sir Mervyn and his two MPC colleagues felt there was a case for more QE to support the recovery and "avoid potentially lasting destruction of productive capacity and increases in unemployment", according to the minutes.
But it was felt more QE would not be enough on its own and the MPC considered other policy measures that could boost the flow of credit and increase demand and supply in the economy.
While rates were held at 0.5%, policymakers discussed the possibility of a further reduction, as well as measures in addition to the multibillion pound Funding for Lending Scheme (FLS), such as increasing credit from non-bank lenders.
More targeted interventions to aid the recovery could be "entertained", but MPC members said many of these fell to other UK authorities.
Another option looked at was reducing the marginal rate of interest that banks receive on their reserves held at the Bank, which would encourage banks to use more of these reserves for lending. But the MPC decided drawbacks to many of these measures outweighed the benefits.
James Knightley, economist at ING Bank, said it was "significant" that Sir Mervyn voted for more QE. He added: "Clearly, if the data disappoints, more QE will be on its way."