“Bank of England policy makers said the pound’s level may prove an obstacle to rebalancing the economy and David Miles cited the currency as he repeated his call for an expansion of stimulus.
The Monetary Policy Committee voted 8-1 to keep their bond- purchase plan unchanged at 375 billion pounds ($595 billion), according to minutes of the Jan. 10 decision published in London today. Members diverged on the risks to the economy, with some saying there was scope for wages to pick up while others noting that the economy could grow faster without generating inflation.
“Substantial headwinds to recovery remained, including the drag to activity from fiscal consolidation, a further squeeze in household real incomes, and the deterioration in U.K. competitiveness over the past couple of years,” the minutes said. “The sterling real exchange rate might be above the level compatible with the necessary rebalancing of the economy.”
The Bank of England halted bond purchases in November and is relying on its so-called Funding for Lending Scheme to aid the recovery. Bank of England Governor Mervyn King said yesterday that credit conditions have improved, and “should improve further as the impact of the FLS kicks in.”
The pound rose after today’s minutes report and data showing falling unemployment. The currency was up 0.2 percent today at $1.5871 as of 9:35 a.m. in London.
