Peterborough, United Kingdom (PressExposure) November 15, 2009 -- Monetary Policy Committee Meeting held on 4 & 5 November 2009 - before turning to its immediate policy decision, the Committee discussed financial market developments; the international economy; money, credit, demand and output; and supply, costs and prices. Following are the summarised minutes.
Financial markets â¢ The price of many assets had increased substantially since the low in March 2009. But during the past month most prices had been little changed. â¢ Equity prices in the UK had fallen by around Â½% over the month but remained well above their levels in March 2009. â¢ Short-term sterling interest rate expectations were broadly unchanged over the month. UK government bond yields had risen slightly. â¢ Sterling had risen by nearly 4% over the month.
The international economy
â¢ The world economy had continued to show signs of recovery but the level of global economic activity as a whole remained significantly depressed. â¢ Strong growth persisted in a number of Asian economies and the US GDP had grown by 0.9% in the third quarter - its first increase since 2008 Q2. â¢ Euro-area GDP had declined by just over 5% from its pre-crisis peak through to the second quarter. Output has probably increased since then although it is uneven.
Money, credit, demand and output
â¢ The growth rate of household and non-financial companies' money balances had not changed much between August and September. â¢ The flow of credit to households and non-financial firms had remained subdued. â¢ The ONS had estimated that GDP had fallen by 0.4% during the third quarter, a significantly weaker outcome than the Committee had expected in August. â¢ Industrial production had declined by 0.8% over the quarter, with manufacturing output little changed. Activity may have picked up towards the end of the quarter. â¢ Households had reduced their consumption substantially over the past year or so. â¢ Retail spending and consumer confidence had picked up during Q3 and in October, possibly heralding some stabilisation in consumption in coming quarters.
Costs and prices
â¢ CPI fell to 1.1% in September. â¢ Whole-economy earnings growth remained weak. â¢ The number of people employed had declined by 45,000 in the three months to August, substantially less than the decline of 269,000 in the previous three-months. â¢ Employment surveys continued to suggest that the rate of job shedding had slowed. That had been accompanied by further falls in average hours worked.
November GDP growth and inflation projections
â¢ The considerable stimulus from the past easing of policy, including asset purchases, and the depreciation of sterling was expected to lead to a recovery in activity. â¢ The supply of bank credit would probably be constrained for a protracted period. â¢ Business investment was likely to remain weak. â¢ The interaction of these factors pointed to a slow recovery in economic activity. â¢ Inflation was likely to rise sharply above the 2% target in the near term, due to higher petrol prices and the reversal of the VAT reduction â¢ The near-term prospects for inflation were more uncertain than usual with uncertainties about the degree of spare capacity in the economy. â¢ The Committee judged that inflation was, on balance, more likely to be below the target than above it for most of the forecast period.
The immediate policy decision â¢ The MPC agreed to maintain the bank rate at 0.5%. â¢ There were differences of view among Committee members on whether the asset purchase programme (quantitative easing) should be increased. â¢ The MPC voted to finance a further Â£25 billion of asset purchases, bringing the total to Â£2000 billion with purchases to be complete within the next three months.
This summary is brought to you by PAYdata Ltd benchmarking consultancy which offers a range of creative solutions to meet a company's unique reward requirements. Follow this link to download a full copy of the November MPC minutes