By David Milliken and William Schomberg
LONDON, July 17 Bank of England Governor Mark
Carney and fellow policymakers voted unanimously against more
bond purchases earlier this month, surprisingly setting aside
their differences ahead of a review on giving guidance about
future interest rates.
British government bond prices slid and the pound rallied
following release on Wednesday's of the minutes of the bank's
July 3-4 meeting, the first under Carney and the first to show
no support for more quantitative easing bond purchases since
Those policymakers who had previously supported buying more
bonds said that although more help for the economy was
warranted, it made sense to hold fire until the central bank had
decided whether to provide clearer guidance on future interest
rates - itself a form of stimulus.
"An expansion of the asset purchase programme remained one
means of injecting stimulus, but the committee would be
investigating other options during the month, and it was
therefore sensible not to initiate an expansion at this
meeting," said those policymakers who would otherwise have
backed more asset purchases.
Finance minister George Osborne, who picked Carney late last
year to head the BoE, has asked him to report back by early
August on giving interest rate guidance, an alternative means of
boosting the economy.
In the minutes, the Monetary Policy Committee said it would
give its main response with its Aug. 7 inflation forecasts, not
the Aug. 1 policy decision.
"It's pretty clear that there's a lot going on in August,
with the work on forward guidance and the Inflation Report,
which suggests that it's really next month's meeting which is
going to be critical," said Investec economist Philip Shaw.
The central bank said there had been further signs that a
recovery was in train but that it remained weak, in line with
its May forecast for 0.5 percent growth in the second quarter of
Data on Wednesday showed that the number of Britons claiming
unemployment benefit fell in June at its fastest rate for three
years in the latest sign that Britain's economic recovery is
gaining momentum, though the overall jobless rate held at 7.8
In previous months, BoE markets director Paul Fisher and
external MPC member David Miles, along with former governor
Mervyn King, had backed an extra 25 billion pounds ($37.8
billion) of asset purchases on top of an existing 375 billion
pounds of purchases.
Other MPC members' views appeared little changed over the
month, with some again expressing doubts about the effectiveness
of more bond purchases, even if the economy did need more
Carney is expected to shake up the central bank and give
longer-term guidance on future interest rates, something he did
while in charge of the Bank of Canada in 2009 and which
burnished his reputation for bold thinking.
The BoE took a surprisingly rapid step towards more detailed
guidance at its July policy meeting, when it said markets were
wrong to bring forward expectations of when British interest
rates might go up, given the weak state of the economy.
Policymakers have been immersed in deeper discussions on
whether the BoE should use so-called "intermediate thresholds" -
linking future monetary policy moves to economic indicators
other than inflation.
Last week, Osborne told reporters that clearer guidance by
the BoE on monetary policy would help households make better
financial decisions and that economies across the world still
needed support from what he terms "monetary activism".
Those forecasts included one for economic growth of 0.5
percent in the second quarter, a slight increase from 0.3
percent in the first three months of the year