Home > Monetary Policy > MPC Split, Dovish King Outvoted

MPC Split, Dovish King Outvoted

A quick note.  The MPC minutes for June show that Mervyn King was outmanoeuvred by the hawks:

Regarding the stock of asset purchases, five members of the Committee (Charles Bean, Paul Tucker, Ben Broadbent, Spencer Dale and Martin Weale) voted in favour of the proposition [no extension of QE]. Four members of the Committee voted against the proposition. The Governor, David Miles and Adam Posen preferred to increase the size of the asset purchase programme by £50 billion to a total of £375 billion. Paul Fisher preferred to increase the size of the asset purchase programme by £25 billion to a total of £350 billion.

I believe the last time King voted against the majority was in August 2005. Correction: June 2007 was a more recent case.

There was also a brief discussion of removing interest paid on some of the “excess” reserves:

The Committee also discussed the possibility of changing the remuneration structure on banks’ reserves at the Bank of England by paying Bank Rate on only a proportion of those reserves. There were drawbacks with such a policy. There would be a large degree of arbitrariness involved in setting meaningful reserve requirements for individual institutions in an environment where their reserves were substantially in excess of the stable norms that had prevailed before the financial crisis. To do so would also change the nature of what was commonly perceived to be meant by Bank Rate, and its relationship with short-term market interest rates.

Even the crazy loonshawks admit they are willing to move, but will “wait and see” how much worse things can get before they bravely step in and rescue us from Eurodoom:

While acknowledging that further stimulus was likely to become warranted at some point, most members noted that there were several key events occurring over the coming weeks that could have a material bearing on the situation in the euro area and that there was merit in waiting to see how matters evolved there before the MPC reached a conclusion on whether to add any further monetary stimulus.

Since disaster or delivery from the Eurocrisis is just around the corner, I’m sure this “wait and see” strategy will work out fine.

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Categories: Monetary Policy
  1. dwb
    June 22, 2012 at 21:44

    OT: in case you missed this, another economist thought of your idea of having the central bank buy foreign sov debt like back in 2002… oh the irony! you’ll never guess who (well, maybe you just did).

    http://ftalphaville.ft.com/blog/2012/06/22/1057141/well-if-the-ecb-wont-do-it/

  2. June 22, 2012 at 23:27

    Svensson as well as Bernanke! I hope I did not give the impression that was a novel idea, merely a modern reinterpretation of an old idea! :)

  1. June 26, 2012 at 23:04

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