MPC’s upbeat minutes suggest the worst is behind us – ITEM Club
Nida Ali, economic advisor to the EY ITEM Club, comments on today’s MPC minutes:
- MPC’s minutes more upbeat about the economic outlook
- Majority of the Committee seems content about its policy response to the faltering recovery
- We urge the MPC to have contingency plans in place in the event that the Eurozone crisis escalates further
“Consistent with last week's Inflation Report, the minutes of February's monetary policy meeting are more upbeat about the economic outlook than in recent months, suggesting that the worst is behind us. This seems to be one of the main drivers behind lowering the size of asset purchases from £75bn in October to £50bn this time around.
“Although two members voted to raise the level of QE by £75bn, the minutes give the distinct impression that the majority of the Committee is content that it has already done enough to loosen monetary policy in the face of a faltering recovery. This is further compounded by the optimistic forecasts for growth and inflation detailed in February's Inflation Report.
“Recent data has been firmer, but we are more downbeat than the MPC about the short-term outlook. Despite the deal agreed for Greece, the potential for an escalation of the Eurozone crisis still represents a significant threat to growth prospects and we would urge the MPC to have contingency plans in place, in the event that the Eurozone crisis worsens.”