MercoPress. South Atlantic News Agency

Minutes show Bank of England divided on cash injection

Mervyn King wanted to pump £ 75 billion instead of the £ 50 billion finally agreed

Governor of the Bank of England Mervyn King wanted to pump more money into the UK economy this month but was outvoted by fellow policymakers. Minutes of the bank's Monetary Policy Committee (MPC) meeting on 6 August reveal that Mr King wanted £75bn rather than the £50bn that was injected

Two fellow committee members also voted for a bigger cash injection.

The decision to pump £50bn came as a surprise, and was already twice the £25bn that the market expected.

The bank originally set aside £150bn for buying assets, but the decision to inject an extra £50bn took the total to £175bn.

The governor, backed by Tim Besley and David Miles, voted instead for a £75bn expansion.

They argued that too little stimulation would mean inflation remaining below its target of 2% for “a sustained period of time... and might harm public confidence in the recovery, causing it to falter”.

They added that if £75bn proved to be too much, they could reverse the policy, by selling assets, and increase interest rates.

Sterling fell sharply as a result of the minutes, as they expressed concern about the strength of any recovery in the UK economy.

The bank has been pursuing a policy of pumping money into the economy - known as quantitative easing - by buying assets from financial institutions.

The aim was that these institutions would then lend some of the money made from these sales to businesses and individuals.

The central bank hoped that this would, in turn, boost spending and help the economy emerge from recession.

Following the committee's meeting earlier this month, the bank issued a statement saying that the UK recession “appears to have been deeper than previously thought”.

But the 6-3 split on the MPC shows that views within the bank differ on just how deep the recession is, and the outlook for inflation.