Bank of England MPC voted 7-2 to increase stimulus
Fears that the UK economy will see little growth this year prompted Bank of England policymakers to increase stimulus measures this month.
The Bank's Monetary Policy Committee (MPC) voted 7-2 in favour of increasing its quantitative easing (QE) programme by £50bn, minutes of the meeting show.
Under QE, the Bank buys government bonds, hoping to create beneficial knock-on effects for the economy.
The MPC also discussed the possibility of interest rate cuts.
The committee voted unanimously to keep rates at the record low of 0.5%. However, the minutes said the MPC could "review" this when it could assess how effective the new Funding for Lending scheme had been.
Under the Funding for Lending scheme, the Bank of England will make low-cost funds available to banks and building societies in an attempt to cut borrowing costs and increase lending to business and individuals.More QE?
The MPC minutes said that the "near-term outlook for GDP growth has weakened".Continue reading the main story
"It now seemed possible that output would be roughly flat over 2012 as a whole, implying a period of two years where there had been little or no economic growth - a near-term picture somewhat weaker than had been expected at the time of the May Inflation Report," the minutes said.
The extra £50bn stimulus has taken the total QE programme value to £375bn. Of the nine members on the MPC, Spencer Dale and Ben Broadbent voted against the increase.
The UK economy is currently in recession, having contracted by 0.3% in first three months of this year and by 0.4% in the final quarter of 2011. The first estimate of how the economy fared during the April-to-June quarter will be released next week.
"It was a little surprising that the vote was 7-2, we had expected a unanimous vote in favour of QE. Also it was interesting that the committee considered a 75 billion addition but scaled it back because of the new lending schemes," said Philip Shaw at Investec.
"This does indicate that there is a degree of polarisation on the committee but with inflation falling we don't see much of a barrier to further QE being sanctioned later in the year if the economy remains weak."