Pound plunges as BoE minutes cause 'snowball of gloominess'

Sterling falls after Bank of England's Mervyn King was out-voted on quantitative easing

LAST UPDATED AT 15:23 ON Wed 20 Feb 2013

THE POUND has plunged against other currencies today after a split emerged among Bank of England policymakers and it was revealed that Mervyn King, the outgoing Governor of the Bank, was out-voted on plans to pump a further £25 billion into the economy.

 The minutes of a meeting of the BoE's Monetary Policy Committee show that King supported plans for further quantitative easing in a bid to stimulate the economy. However, he and two supporters of the idea were outvoted 6-3. The papers also reveal that the MPC discussed cutting the bank's interest rate from the historic low of 0.5 per cent, where it has been for almost four years.
 
It was only the fourth time that King has been out-voted in his ten years at the helm, noted The Times. And the Daily Telegraph added: "The split raised the prospect that the central bank might restart its quantitative easing programme. The last time there was a similar 6-3 split on the MPC was in June 2012, and the following month a majority of the MPC backed a £50bn increase in asset purchases."
 
After the publication of the minutes, sterling immediately fell to its lowest level for more than a year against both the US dollar and the euro.
 
Analysts said that the fall was bad news. Lee McDarby at Investec Corporate Treasury said the "friendless" pound had gone "from bad to worse". He added: "This continues the snowball of gloominess which has been gathering pace against sterling.”
 
Foreign exchange expert Glenn Uniacke of Moneycorp said the falling pound would only add to the inflationary pressure in the UK and would have minimal benefits for exporters.
 
"The irony is that the euro, in the absence of a new crisis, is starting to look and behave like a safe haven currency," he added.
 
The pound's latest woes coincided with good news on the jobs front. Latest figures show that the number of Britons in work has risen to a record 29.7 million, with nearly three-quarters of them in full-time employment.
 
Meanwhile the jobless total fell by 14,000 between October and December to 2.5 million. · 

For further concise, balanced comment and analysis on the week's news, try The Week magazine. Subscribe today and get 6 issues completely free.