Wednesday, October 19, 2011
Unanimity at the Bank
Posted by David Smith at 02:00 PM
Category: Thoughts and responses

Following Mervyn King's downbeat overnight speech here, the Bank's October minutes were also downbeat, with a unanimous 9-0 vote in favour of 75 billion of additional quantititaive easing. Though this was in line with market expectations ahead of the publication of the minutes, it was a long way from what most analysts expected ahead of the vote two weeks ago.

There are some oddities in the minutes. In paragraph 16 they refer to consumer confidence being at its weakest since March 2009 and expectations about household finances being lower than at any time since November 1992. Then in the next paragraph they talk about the slowdown being driven by external factors.

The overall message, however, is clear: "While the stimulatory monetary stance and present level of sterling should help to support demand, the weaker outlook for, and the increased downside risks to, output growth meant that the margin of slack in the economy would probably be greater and more persistent than previously thought. This made it more likely that inflation would undershoot the 2% target in the medium term, without further monetary stimulus."

I think this is growth targeting, dressed up as an inflation and spare capacity argument. Judge for yourself in the minutes, here.