Summary of April MPC Minutes

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The Decision

Bank rate held at 0.5%

Stock of asset purchases held at £375 billion.

The Discussion

Financial markets

  • Relatively limited reaction from financial markets to Cyprus bailout
  • Equity markets continued to be buoyant, some major international equity indices at all-time nominal highs
  • Little reaction to UK being placed on negative watch by Fitch

International economy

  • Global growth continues to show gradual recovery with world trade and investment picking up in early 2013 but pattern of growth remains uneven
  • Tentative signs of strengthening confidence in the Euro area have not been maintained
  • US indicators positive with robust consumer spending, a strong housing market and growing employment despite more restrictive fiscal policy.
  • Asia still showing evidence of expansion with Chinese PMI rising in March and business confidence improving in Japan.

Money, Credit, Demand and Output

  • Turning to the UK, there is mixed news of activity in the first quarter of 2013 from official indicators
  • Credit conditions have eased with the supply of credit increasing and some feed through in loan rates. However small companies continue to report more difficulties accessing finance and there has been little sign that easing of credit access has fed through into higher net lending to businesses.
  • There is some evidence of increased supply of credit feeding through into the housing market.
  • The committee agreed that a well-capitalised banking system is important for the capacity of the economy over time and saw merit in boosting lending through an extension to the FLS.

Supply, Costs and Prices

  • Inflation expected to remain high, rising to 3% in the middle of the year
  • Pay growth has continued to be weak
  • Productivity remains puzzling as employment continued to increase despite falling output. Relatively low company failure due to low nominal interests rates and forbearance by lenders was discussed as one of the factors contributing to low productivity.


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