Bank of England remains divided on stimulus

Wednesday 22 May 2013 12.32
Bank of England publishes minutes to last meeting in May
Bank of England publishes minutes to last meeting in May

The Bank of England's policymakers remain divided on whether to provide more stimulus to the flat-lining economy, according to the minutes of their meeting in May.

The report showed the nine members of the Monetary Policy Committee unanimously approved keeping the base interest rate at 0.5% but disagreed on pumping more money into the economy.

Since 2009, the bank has injected £375 billion sterling into Britain's economy in a programme known as quantitative easing.

Under the programme, the bank buys government bonds from financial institutions, hoping they will lend to businesses and individuals. Governor Mervyn King and two other members pushed for an increase of £25 billion at the meeting, but were outvoted.

Although the British economy has narrowly dodged another recession, it remains fragile. That was made clear in new figures on retail sales, which showed a sharp 1.3% drop in April compared with March. That is much worse than the 0.1% rise analysts were expecting.

Economists noted that the Bank of England's minutes showed a greater concern about the impact that stimulus could have on inflation expectations.

Incoming Governor Mark Carney, who will take office in July, could struggle to garner support for more stimulus - unless the economic data continue to be as weak as the retail sales figures suggest.