The Bank of England committee voted to continue with its asset purchase program financed by the issuance of central bank reserves and to increase its size by £50 billion ($79.25) to a total of £125 billion.

The bank had acquired just over £52 billion of assets through its Asset Purchase Facility (APF). The committee said that there were some arguments for not extending the £75 billion asset purchase program this month based around uncertainty about the impact of asset purchases on this scale to stimulate nominal spending.

There were also signs that economic conditions could be starting to improve, prove and there was a substantial degree of monetary stimulus already in place. The concern is that given the uncertain nature of the transmission mechanism, there was a risk that the committee would not be able to identify early enough when it should be withdrawn.

Arguments in favor of expanding the asset purchase program showed that there was a persistent degree of slack forecast for the economy and a high probability that inflation, in the absence of a further monetary stimulus, could significantly undershoot the 2% target in the medium term.

Projections indicated that more monetary stimulus was probably needed to bring inflation back to target in the medium term.

The Committee could use the instrument of asset purchases to stimulate demand, thus enabling it to reduce the period of time at which bank rate had to be held at extraordinarily low levels.

There was an expectation in markets and elsewhere that the asset purchase program would be extended. Failure to do so when the economic outlook suggested more monetary stimulus was necessary could harm the public’s confidence in the recovery.

"The risks of stimulating demand too little at the current time seemed greater than the risks of stimulating it too much," said the committee. "If the recovery faltered, then policymakers might find that their ability to stimulate demand in the face of receding confidence would be impaired. But if inflation were to rise more rapidly than expected and appeared likely to breach the inflation target on the upside, then monetary policy could be tightened through some combination of raising Bank Rate and selling assets back to the market."

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.