Bank of England governor Mervyn King was defeated for a third consecutive month in his effort to convince his policy-setting colleagues to increase the Bank's £375bn programme of quantitative easing.
Minutes from the Monetary Policy Committee's April meeting show King was outvoted 6-3 in his effort to expand the programme of asset purchases by £25bn. Members voted 9-0 to keep the Bank's key lending rate unchanged at a record-low 0.5 percent.
"Further asset purchases, by lowering longer-term interest rates and supporting a range of asset prices, could facilitate a smoother path towards the economy's new equilibrium, help prevent a more persistent reduction in spending, and thereby avoid potentially lasting damage to productive capacity," the Minutes said. "There were also arguments in favour of maintaining the current size of the asset purchase programme. Monetary policy was already highly stimulatory and the benefit of past actions would continue to be felt ... In addition, the extent to which supply capacity would respond to greater demand would depend on how quickly capital and labour could be redeployed from declining to growing businesses. This issue was better addressed by policies to improve the working of credit markets."
The euro rose to a one month high of 86.055 pence following the release of the Minutes and hit a session low of $1.5302 against the US dollar.