Bank of England Split Vote
Published / Last Updated on 19/08/2009
Bank of England Split Vote
The Monetary Policy Committee of the Bank of England had a split vote when it agreed to keep interest rates at 0.5% and inject a further £75bn into the economy.
Some of the committee wanted to inject a lower amount of £50bn, but the Governor, Mervyn King and two other committee members wanted a higher amount of £75bn.
Originally just £100bn was set aside for releasing cash into the economy with £25bn extra planned, but with this additional £75bn, it now takes the total to £175bn. They are doing this by ‘buying back’ government debt called Gilts, a policy known as quantitative easing.
We suggest this move will further devalue the pound on World exchange markets, making Britain poorer and indeed will also create a huge inflation risk when we come out of recession as there will be too much money in the economy.
The Bank of England counter this argument by saying that they will simply reverse the policy and start borrowing again i.e. issuing gilts.
If only it were that simple. Inflation is a steam train that is very difficult to stop without huge interest rate increases to kill spending. You have been warned.
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