BOE: Hawks vs. Doves

The latest Bank of England (BOE) monetary policy meeting minutes was a doozy! While it revealed that policymakers voted unanimously to keep asset purchases and interest rates unchanged, it also showed that they were split on their views on further stimulus.

Remember, the current asset purchase program of the central bank is set to end in November, which means the nine policymakers will have to decide soon what they will do next. For now, it appears that there are two sides to the story: the hawks’ side and the doves’ side.

Hawks: Further QE Isn’t Necessary

One of the main points raised by the hawks is that pumping more money into the economy isn’t the right thing to do given how the country’s inflation rate is STILL above the BOE’s mandate. The most recent CPI report showed that the inflation rate is at 2.2%, slightly higher than the 2.0% target.

There’s also BOE Governor King‘s concern. He said that there will come a point in time that monetary policy would ultimately reach the limit of what it could do to help growth. It sounds like he’s saying that the central bank can only do so much, and at the end of the day, growth will have to come from businesses and consumers.

The hawk camp is currently composed of the following BOE members: Chief Economist Spencer Dale, External Member Ben Broadbent, and Martin Weale.

Doves: More QE Might Be Needed

Several other MPC members, on the other hand, argued that there was “considerable scope for asset purchases to provide further stimulus.” After all, recent business surveys in the U.K. hinted at a possible economic contraction while the government’s continued austerity plans could keep weighing on growth.

On top of that, the MPC meeting minutes revealed that there were barely any improvements on the central bank’s growth and inflation outlook over the medium term. Policymakers also pointed out that their estimated pick-up in economic growth, which should’ve been a result of their previous increase in asset purchases, still wasn’t kicking in.

What’s next for the BOE?

With MPC members still having opposing views on the need for further stimulus, there’s a good chance that these policymakers will continue to sit on their hands for a while. They will probably use this time to assess the impact of their most recent easing moves before deciding if they need to call for another round or not.

Aside from that, BOE officials might also take some time to mull about alternative easing measures. Recall that the IMF just cut their growth forecasts for the U.K. earlier this month and remarked that BOE Governor King and his men might need to come up with “further monetary easing through unconventional measures” later on.

For now, let’s just sit tight and wait for updated growth and inflation forecasts from the U.K. before figuring out if the BOE will need to extend their bond purchase program. I’ll keep y’all posted!