At its October meeting the Bank of England's Monetary Policy Committee (MPC) kept its policy settings unchanged, believing that they were adequate to meet its medium term two per cent inflation target, minutes from the meeting reveal.

The committee stuck to its guns despite the fact it is anticipating some near-term inflation pressures.

As was to some extent already known, the minutes state that this time around there were some differences of view between MPC members about the outlook and the likelihood that further easing in policy would be required.

Some committee members felt that there was still considerable scope for more asset purchases (quantitative easing) to provide further stimulus, while others, while acknowledging that asset purchases had the scope to lower long-term yields further, questioned the magnitude of the impact that lower long-term yields on corporate debt and equity would have on the broader economy at the present juncture.

Returning to the subject of inflation risks, the minutes show how the MPC continues to debate the so-called "productivity puzzle" and to what extent productivity can be expected to pick up as demand recovers, such that the economy can grow without generating inflationary pressures.

Despite all of the above, economists remain convinced that the central bank will go ahead with a widely expected increase in the size of its asset repurchase programme, by £50bn.

Of possible interest in that regard, MPC members were almost certainly cognizant of what markets' expectations were when they met, and had already factored those in, point out analysts at Digital Look.

For her part, Vicky Redwood, Chief Economist at Capital Economics, sees things in the following manner: "Overall, then, it is a close call whether a majority votes for more QE next month, but the fact that at least some members are clearly convinced of the need to do more persuades us to stick with our forecast of a £50bn increase (though a rate cut seems unlikely for now)."

AB

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