The Bank of England has kept interest rates at a record low of 0.5% since March 2009
21 September 2011 Last updated at 16:55
The Bank of England has opened the door to injecting more money into the faltering UK economy.
“Most members” of the Bank’s Monetary Policy Committee agreed that the case for an “immediate” stimulus had strengthened, according to minutes from their meeting in September.
Some analysts believe that quantitative easing could re-start in November.
The minutes also showed that the nine MPC members voted unanimously to keep interest rates unchanged at 0.5%.
Suggestions of further stimulus come as storm clouds gather over the UK economy.
On Tuesday, the International Monetary Fund cut its UK growth forecast for this year and next, and there is speculation that the government is planning to boost spending on public projects.
On Wednesday, latest data showed that public sector net borrowing during August was a higher-than-expected £15.9bn.
It means a third of the way into the fiscal year, cumulative borrowing at £52bn is only 7% less than a year ago despite the government’s programme of budget cuts.
Although only one MPC policymaker – Adam Posen – voted in favour of the Bank resuming assets purchases, others were considering such a move.
The minutes say: “For some members, a continuation of the condition seen over the past month would probably be sufficient to justify an expansion of the asset purchase program at a subsequent meeting.”
Some economists feel the Bank is unlikely to act on QE until it receives next month the first estimates of third-quarter economic growth.
This suggests that further stimulus – under which the Bank would purchases bonds and other assets from financial institutions – may not start until November.
Howard Archer, chief UK and European economist at IHS Global Insight, said: “The minutes of the September MPC meeting are appreciably more dovish, opening the door wide to more quantitative easing by the Bank of England and very possibly sooner rather than later.
“We expect the MPC to approve a further £50bn in quantitative easing during the fourth quarter. A move as soon as October is entirely possible, but we suspect November is more likely.”
The minutes show that MPC members discussed a raft of deteriorating economic signs, including slowing retail sales growth, lower output, falling exports and a flagging housing market.
The MPC’s acknowledgement that it may need to provide more support for the economy was welcomed by business.
David Kern, chief economist at the British Chambers of Commerce, said: “Although the voting at the September meeting was unchanged, the minutes suggest that the MPC is gearing itself up to increase the quantitative easing programme in the next few months. Business will see this as a welcome development.”
The MPC noted that inflation was still likely to rise from its current 4.5% to 5%, well above its target of 2%.
But it said it was still expecting inflation to come down to target in 2012, thanks to the likelihood of a synchronised period of weak global growth, pressured by the eurozone crisis and a US economy beset with its own problems.
Mr Posen has argued for months that a weak economy was a bigger danger than rising inflation and therefore the QE programme should be increased by £50bn, to add to the £200bn already agreed.