The Bank of England's (BoE) latest meeting minutes reveal that none of the central bank's voting members have changed sides on quantitative easing.
The minutes released on Wednesday morning showed that the vote on maintaining the asset purchase programme unchanged was six-to-three at the March 7th meeting, unchanged from the prior meeting.
BoE Governor Mervyn King was outvoted for a second straight meeting, not a common occurrence. The last time King was outvoted was in June 2012 although he would prevail in the following meeting.
King, Paul Fisher, and David Miles remained the same three members who voted against the proposition, preferring to increase the asset purchase programme by a further £25bn to a total of £400bn.
Analysts have been looking forward to the meeting minutes in order to find important clues on the future direction of the central bank's monetary policy. Expectations of increased quantitative easing (QE) have been raised after a recent inflation report suggested that the central bank may be more willing to withstand higher prices in order to stimulate the economy.
Additionally, BoE voting members had begun discussing alternative policy actions in February, including talks of negative interest rates by Paul Tucker, prompting analysts to consider him a candidate for switching his vote to the more dovish side.
"We think that we'll see a six-three or possibly even five-four vote, with Governor King continuing to favour further QE," TD Securities analyst Alvin Pontoh said ahead of the release.
"The economy is going nowhere fast and the BoE has said it will essentially look through above-target inflation," said Rob Wood, an economist at Berenberg Bank. "Whether of its own volition, or because the Chancellor tweaks its inflation remit in the Budget, we continue to expect the BoE to add more monetary stimulus this year."
Nevertheless, the meeting minutes are considered a laggard indicator because of their release two weeks after the meeting. Since the last meeting, expectations appeared to have moderated following statements that suggest members may have become more hawkish. King and other members have made pound-support commentary after the currency markets placed strong downwards pressure on the sterling pound.
The pound has lost around 8.0% versus the US dollar
since the start of the year on expectations for more QE.
Additionally, inflation data released on Tuesday revealed an uptick in price growth with consumer prices rising to 2.8% from 2.7%, marking the 39th month above the central bank's 2.0% target.
Meanwhile, growth points to a slow but sustainable recovery.
Regarding inflation, the BoE minutes read: "The Committee continued to judge that, as long as domestic cost and price pressures remained consistent with inflation returning to the target in the medium term, it was appropriate to look through the temporary, albeit protracted, period of above-target inflation resulting from higher administered and regulated prices."
On the other hand, inflation risks have remained the main argument against expanding the asset purchase programme. The BoE argued that benefit of past actions would continue to be felt and there was a risk of inflation expectations drifting upwards. "It might also lead to an unwarranted depreciation of sterling if it were misinterpreted as a lack of commitment to maintaining low inflation in the medium term," it said.
Later on Wednesday, Chancellor of the Exchequer George Osborne will present the 2013 Budget. Eyes will be on whether Osborne suggests changes to the central bank's mandate, allowing it more flexibility to stimulate growth at the risk of higher inflation.
Analysts will also be interested in seeing whether Osborne remains highly focused on fiscal consolidation in an already sluggish economy. If he does, monetary accommodation may be seen as the only alternative to stimulate the economy.