BoE: 8-1 on Holding QE

Adam Posen ended his push for further Bank of England stimulus this month and David Miles described his view on the need for more as “finely balanced” as officials said inflation may turn out faster than forecast.

The pound rose after minutes of the central bank’s April 4- 5 meeting showed that Posen joined the majority of the nine- member Monetary Policy Committee in seeking no change to the 325 billion-pound ($517 billion) asset-purchase target. U.K. jobless claims rose less than economists forecast and the official unemployment rate fell, a separate report showed.

While Bank of England officials noted that the U.K. may face a recession in the first half of this year, they said inflation may turn out faster than forecast. They endorsed a final month of bond purchases to aid growth while setting the stage for a possible pause in May, when they will consider new quarterly forecasts and debate whether to halt the so-called quantitative-easing program.

“The probability of QE in May — which already looked relatively low — has diminished significantly,” said Ross Walker, an economist at Royal Bank of Scotland Group Plc in London. “It is too soon to rule out further QE in the second half of 2012, but the probability of this is diminishing in response to short-term inflation ‘stickiness’ and firmer underlying activity data.”

While the International Monetary Fund said yesterday that policy makers can still loosen policy further to aid economic growth, data showed inflation unexpectedly accelerated for the first time in six months. Consumer prices rose an annual 3.5 percent in March, compared with 3.4 percent in February.

Bloomberg

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