Bank of England hints at more stimulus

LONDON — The Bank of England appears to be gearing up to pump billions more into the British economy to stimulate a faltering recovery, minutes to its last rate-setting meeting suggested Wednesday.

Though American economist Adam Posen was alone among the nine members to vote in favor of resuming asset purchases, "most members" agreed that the case for more stimulus had strengthened in the past month, according to the minutes of the September meeting of the Monetary Policy Committee.

"For some members, a continuation of the conditions seen over the past month would probably be sufficient to justify an expansion of the asset purchase program at a subsequent meeting," the minutes said.

All nine rate-setters also voted to keep the main interest rate unchanged at the record low of 0.5 percent.

Sterling tanked from $1.5681 to an 8-month low of $1.5596 as markets priced in the likelihood of more monetary stimulus in the months to come.

The program, known as quantitative easing, was halted in December 2009 after 200 billion pounds ($320 billion) had been splashed out buying financial assets from banks.

Most analysts think the bank will hold off until it is armed with the first estimate of third-quarter economic growth and its quarterly economic projections. That suggests that more stimulus would not emerge until November.

"The minutes indicate that the MPC already sees the current situation, if it continues, to merit further quantitative easing," said Chris Williamson, chief economist at Markit.

"Early warning indicators such as the business surveys have slumped to levels that would normally trigger extra stimulus, austerity measures have hit domestic consumer confidence via record public sector layoffs, growth has slowed globally and the ongoing eurozone financial crisis continues to rattle financial markets," Williamson said.

The Bank of England's Posen argues that the key economic problem facing Britain is the lack of financing for "constructive risks" in the private sector as households concentrate on paying off debt, banks build up reserves and non-financial companies hoard cash. The answer, he contends, is an expansionary monetary policy.

Mounting speculation that the Bank of England may do more to shore up the economy comes just hours ahead of an expected decision by the U.S. Federal Reserve to enact more measures to help lift U.S. economic growth, which has also slowed down sharply in recent months.