Keep Calm and Carry On
This is from the minutes of the February 2012 MPC meeting – the punchline is right at the end:
37. The Committee had announced a programme of £75 billion of asset purchases at its October meeting, and this had recently been completed. While the Committee continued to monitor the impact of its asset purchases, it saw no compelling reason to think that their impact on nominal demand would be materially different than had been anticipated in October. It would keep this under review in judging the policy actions needed to support the recovery and meet the inflation target. In terms of the immediate decision, the Committee considered the arguments for increasing the stock of asset purchases by £50 billion or £75 billion, either of which would be sufficient to put inflation broadly on track to meet the target in the medium term on its central projection. Committee members placed different weights on these arguments.
38. A number of reasons for the smaller increase were advanced. Recent data on the domestic and international economies had on balance been more positive than might have been anticipated towards the end of 2011, pointing to the possibility that growth might be stronger than expected in the near term. Moreover, the ECB’s LTRO had reduced some of the worst immediate downside risks to the outlook stemming from the euro area. Although inflation had fallen back broadly as expected, short-term inflationary pressures remained. The rate was still well above the 2% target and there was a risk that inflation might prove more persistent than in the Committee’s central projection, especially if downward pressure from labour market slack was less than expected. An increase of £50 billion in the stock of asset purchases would represent a material monetary stimulus, and it was not clear that a stimulus larger than that was warranted at the current juncture. In addition, given market expectations, a larger increase risked sending a signal that the Committee thought the economic situation was weaker than it was.
What clearer message could we get that the MPC see the UK economy as being exactly where they want it? There is no demand problem. These aren’t the unemployment figures you’re looking for. Everything is under control. Keep calm and carry on.