MPC Minutes (Feb 2012) - Key Points

Subscribe to Campaigning blog feeds


The decision:

The bank rate was held at 0.5% and the asset purchase programme was extended by £50bn to £325bn.

All nine members voted to extend the asset purchase programme. Two members voted for a £75bn increase.

Recent developments:

Financial markets

  • European financial markets fared better since the the ECB's additional long-term refinancing options (LTROs) in December.
  • Short-term bank funding markets had also improved.
  • Spanish and Italian bond yields had come down, though remained elevated.
  • UK short-term interest rates had changed little over the month.
  • Equity indices had started to improve.

The international economy

  • Upside news on near-term prospects for global economy including positive PMIs.
  • US growth looking stronger: 0.7% in 2011 q4.
  • Even Euro area PMIs picked up in January, suggesting growth had not continued to weaken.

Money, credit, demand and output

  • UK GDP fell 0.2% in the last quarter of 2011, broadly in line with expectations.
  • Since then PMIs have improved sharply, though other surveys were weaker.
  • First quarter of 2012 may be a little stronger than previously expected.
  • Credit conditions for businesses and households remained tight, but bank funding markets improved since the end of the year which could lead to improvement.

Supply, costs and prices

  • CPI fell to 3.6% in January, as expected.
  • Employment rate broadly flat since November.
  • Pay growth remained subdued and expected to remain modest.
  • Little significant movement in medium-term inflation expectations.

GDP and inflation projections

  • Slight contraction in the final quarter of 2011 followed a period of sluggish growth.
  • Monthly indicators pointed to a pickup in output in January.
  • There are continued substantial uncertainties surrounding the outlook for growth, most significantly due to developments in the euro area.
  • Growth will be dependent on whether households start spending again (as real income squeeze abates); cost and availability of credit; impact of asset purchases on demand.
  • Likely path for inflation also highly uncertain, with several unknown factors such as the path of energy prices.

Key risks to inflation

  • On the upside:- companies' input costs rising further- disruptions to gas and oil supply- earnings growth outstripping slow productivity growth
  • On the downside:- growth too weak to absorb the pool of spare capacity- Euro area crisis increasing banks' funding costs and feeding through into the availability and cost of credit- Slower than expected growth in household spending


This person has now left EEF. Please contact us on 0808 168 1874 or email us at if you have any questions.

Other articles from this author >
Online payments are not supported by your browser. Please choose an alternative browser or make payments through the 'Other payment options' on step 3.