The minutes of the May meeting of the Bank of England’s Monetary Policy Committee (MPC) revealed that the tone was as expected concerning votes on the quantitative easing (QE) programme as well as the standard base interest rate.  Only one member of the committee, David Miles, voted for more QE to stimulate the economy.  The minutes were released following the International Monetary Fund (IMF) encouraging the MPC to cut interest rates even further and inject more money into the economy.

The IMF believes the UK economy needs a boost as it stepped into a second recession in the first quarter and evidence of further recession problems appeared in the beginning of the second quarter.  Retail sales failed to perform as the figures declined in April and manufacturing struggled with the weakest output data since December.

Adam Posen had been pushing for more QE but stepped back in the May meeting leaving only David Miles voting for more.  Most members no longer believe that inflation will pose a problem hovering very far above the goal rate of 2.0 per cent.  Annual inflation now sits at 3.0 per cent and is expected to remain above 2.0 per cent throughout the year.

The standard base interest rate was left at 0.5 per cent leaving borrowing cheap for now.  However, despite the move by the MPC lenders are raising their own interest rate offerings as they take on a more cautious outlook in lending and funding costs rise for them.  Borrowers can expect to see this trend to continue according to experts.