THE TAKEAWAY: BoE voted 9-1 against raising asset purchases -> Central banks sees inflation above 2% target in the upcoming year -> Sterling trading slightly higher
According to the minutes from their last meeting, Bank of England members voted 8-1 to keep the asset purchase target at 375 billion, despite pressures from the nearby Euro crisis continuing to weigh on UK growth. The bank’s Monetary Policy Committee also unanimously voted to keep the interest rate at 0.50%, for the central bank has previously said that interest rate cuts is not one of its current preferred tools.
The usually hawkish David Miles voted for a 25 billion Pound increase to the BoE’s quantitative easing. The bank cited substantial inflation risks as a reason the MPC didn’t increase stimulus. It predicted inflation will remain above the 2% target for the upcoming year.
The Bank of England also predicted that fourth quarter GDP may fall following a 1% economic growth in Q3. Although the bank noted that immediate risks from the Euro-area are less pressing, it said that drag from Euro-zone austerity is likely to continue.
The overwhelming vote against further stimulus gave a slight boost to Sterling in forex markets. GBPUSD is currently trading slightly below the 1.6300 line, which is also a year long high and a point of resistance.
GBPUSD Daily: December 19, 2012