Bank of England backs away from more stimulus as economy picks up

Wed Sep 18, 2013 7:26am EDT
 
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By David Milliken and Christina Fincher

LONDON (Reuters) - The Bank of England moved further away from adding more stimulus to Britain's economy this month and seemed less concerned by rising market borrowing costs, minutes of its latest policy meeting showed on Wednesday.

The two current policymakers who in previous months had seen a compelling case for more asset purchases to stimulate activity retreated from this position at the September meeting following signs of strengthening economic growth.

The nine-member Monetary Policy Committee (MPC) also chose not to repeat July and August's warning that bond market yields were rising faster the data warranted - a rise the Bank had previously worried might be a headwind to the recovery.

It said "promising" data over the past month meant output in the third quarter was likely to be around 0.7 percent, higher than the 0.5 percent it forecast in August. It also predicted growth could strengthen further towards the end of the year.

"Over the month the evidence was consistent with a recovery at least as strong as that expected at the time of the August Inflation Report," the minutes said.

"Were the recovery to falter, the case for further asset purchases would be stronger. But no member judged that further stimulus was appropriate at present."

Policy committee members Paul Fisher and David Miles had voted earlier in the year to restart the central bank's quantitative easing (QE) asset-buying program. They put their call on hold in July and August pending an assessment of future rate guidance adopted by the new governor, Mark Carney.

British 10-year government bond yields surged above 3 percent and sterling hit an eight-month against both the euro and the dollar following the minutes.   Continued...

 
The Bank of England is seen in the City of London August 7, 2013. REUTERS/Toby Melville