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.
- 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