MPC warns of GDP fall

INTEREST rate setters believe the UK economy could shrink in the fourth quarter, minutes of their latest meeting show.

The Monetary Policy Committee remained split over injecting more cash into the economy with eight members voting against expanding quantitative easing but one member arguing the case for action was “strong”.

According to minutes of the December meeting, the committee took the view that the better than expected GDP data for the fourth quarter was largely down to “temporary factors” such as the Olympics and these would unwind “probably resulting in a contraction in headline GDP in the fourth quarter”.

Coverage of the MPC is brought to readers of TheBusinessDesk.com in partnership with stockbrokers Redmayne-Bentley.

The minutes suggest the majority of the committee believes inflation is set to remain above the 2% target “for the next year or so”.

David Miles was the only member to make the case for further QE, arguing slack in the economy meant higher growth could be achieved without a risk to inflation.