Bank of England policymakers agree that Britain's stalled economy will fail to pick up in the current fourth quarter, according to minutes of their last meeting published on Wednesday. The forecast comes as the BoE minutes showed that members of the Monetary Policy Committee (MPC) voted unanimously at the October meeting to pump £75 billion (£119 billion, 86 billion euros) into the British economy.
They also voted 9-0 earlier this month to keep British interest rates at a record low 0.50 percent - where they have stood since March 2009. In a gloomy warning at the October 5-6 gathering, the MPC warned that "available indicators suggested that the underlying rate of growth ... would be close to zero in the fourth quarter", or three months to December.
The minutes revealed that the MPC chose to reactivate its quantitative easing (QE) policy with £75 billion of new money - to try and address "acute" stresses in bank funding markets. "There had been increasingly visible symptoms over the month of rising stress in financial markets as concerns about the vulnerabilities associated with the indebtedness of several euro-area governments and banks had intensified," said the minutes.
Under QE, the bank creates new cash which is used to purchase assets such as government and corporate bonds in a bid to encourage lending and in turn boost economic activity. Between March 2009 and January 2010, the BoE injected £200 billion ($321 billion, 228 billion euros) into the British economy under the radical QE policy, to aid recovery from recession - but this has not been deemed enough.
The minutes were published one day after official data showed that British Consumer Prices Index (CPI) annual inflation surged to a three-year high of 5.2 percent in September on soaring domestic energy prices. The Bank of England's main task is to use monetary policy to try and keep CPI annual inflation close to a target of 2.0 percent.
BoE governor Mervyn King predicted on Tuesday that inflation "should fall back sharply early next year," and blamed the figures on temporary spikes in energy and import prices. Gross domestic product (GDP) - the value of all services and goods produced in the economy - grew by just 0.1 percent in the second quarter, recent official data showed.
That meant that the economy has flatlined over the nine months to the end of June. It shrank by 0.5 percent in the final three months of 2010, but grew by 0.4 percent in the first quarter of 2011. The Office for National Statistics will publish the first official GDP figures for the third quarter on November 1.
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