Bank of England head wants more stimulus: minutes

Bank of England governor Mervyn King called for more quantitative easing stimulus cash earlier this month, minutes showed on Wednesday, pushing the pound to a near 16-month low against the euro.

The BoE's nine-member Monetary Policy Committee voted 6-3 to keep its QE cash stimulus amount at £375 billion ($574 billion, 429 billion euros), according to minutes from their February 6-7 gathering.

However, outgoing chief King was joined by fellow MPC members David Miles and Paul Fisher in calling for another £25 billion in stimulus cash as Britain faced the prospect of a third recession in five years.

The British pound struck multi-month lows as the minuts stoked fresh concern over inflation and the economic outlook, dealers said.

Sterling slumped to 87.64 pence per euro -- which was the lowest level since late October 2011. It also dived to a seven-month nadir at $1.5295.

"2013 just goes from bad to worse for the pound as this morning's MPC minutes came out with a surprisingly bearish vote of 6-3 against further asset purchases after 8-1 last time around," said Investec bank economist Victoria Clarke.

"This continues the snowball of gloominess which has been gathering pace against sterling with the downside risk now getting more worrying for the friendless pound."

Under quantitative easing, the Bank of England creates cash that is used to purchase assets such as government and corporate bonds with the aim of boosting lending and in turn economic activity.

At the same time, however, QE can stoke inflation as it is tantamount to printing money.

King, who is replaced by Canada's Mark Carney in July, argued in the minutes that more QE was needed to support recovery and "avoid potentially lasting destruction of productive capacity and increases in unemployment."

However, the majority of the MPC felt that other targeted measures, such as the central bank's funding for leanding scheme (FLS), would be more effective.

The BoE's £80-billion FLS initiative provides lenders with cheap funding in an attempt to lift lending to households and businesses and ward off a credit squeeze.

The pound has in recent weeks been hit by poor economic data, including recent news that official retail sales slid by 0.6 percent in January from December. That confounded expectations for a 0.6-percent gain.

Other figures showed that British gross domestic product shrank by 0.3 percent in the fourth quarter of 2012 compared with the previous three months.

Another contraction in the current first quarter of 2013 would place Britain in a "triple-dip" recession following the 2008 global financial crisis.

Wednesday's minutes added that at their February meeting, BoE policymakers were unanimous in freezing the bank's key interest rate at a record-low 0.50 percent -- where it has now stood since March 2009, or almost four years.