“Bank of England governor defeated in bid to expand money printing plan,” said The Daily Telegraph. Wednesday’s Monetary Policy Committee minutes show Bank boss Mervyn King was in a minority of three interest-rate setters who wanted a £75bn increase to £200bn in its quantitative easing (QE) cash creation programme; the other six were content with the fresh £50bn being minted.
King reckoned the risk of “another large stimulus might be less than the possible costs of acting too cautiously”, with an extra boost needed to raise consumer price inflation to the 2% medium-term target.
But this week’s figures showing CPI holding firm at 1.8% may mean that could happen sooner than expected.
What the commentators said
It “may not feel like it, as you pick a path through the binge drinkers on the way home, but the price of alcohol is higher than a year ago”, said Ian King in The Times. “So are tobacco, toys, CDs and DVDs.
It isn’t quite a return to the days when it was symptomatic of the British disease, but the… refusal of inflation to fall as expected is unwelcome.” Sterling weakness – making imported goods more costly – is the obvious reason.
But “even with a slow recovery, will there really be so much spare capacity in the economy that inflation continues to fall?” David Prosser asked in The Independent. “If so, then the spectre of deflation may continue to cast a shadow – if not, the Bank could even find itself worrying about inflation edging back up, which is what critics of QE have felt nervous about all along.”