BoE governor backed more stimulus for UK economy

he Bank of England expressed growing concern over Britain's economy and came surprisingly close to backing another monetary stimulus in a move that piled further pressure on the pound.

Minutes of the last policy meeting of the Bank of England released Wednesday showed outgoing Gov. Mervyn King and two other members of the Monetary Policy Committee supported another cash infusion to revive Britain's ailing economy.

However, King, Paul Fisher and David Miles, were outvoted by the six others, who preferred to keep policy unchanged.

Since 2009, the Bank of England has pumped 375 billion pounds ($579 billion) into the British economy. Under the program — commonly called quantitative easing — the bank buys government bonds from financial institutions in the hope they will use the proceeds to boost the economy.

King and the two others wanted to inject another 25 billion pounds, arguing the risks to inflation were limited. Inflation stood at 2.7 percent in January.

"Although inflation seemed likely to remain above the 2 percent target over the next two years, the degree of slack in the economy, and the likely positive response of supply capacity to increased demand, meant that higher output growth would not necessarily lead to any material additional inflationary pressure," those backing another stimulus argued, according to the minutes.

King's apparent willingness to allow inflation to remain above target has raised speculation that he and others are more flexible in their approach. This summer, King is due to be replaced by Bank of Canada Gov. Mark Carney, who has indicated he backs a more flexible inflation target.

"The MPC has shifted significantly in a more dovish, pro-active direction — in part we surmise to facilitate the transition towards Mark Carney's term as governor," said Ross Walker, an economist at the Royal Bank of Scotland.

The vote was a surprise — most economists were expecting only Miles to vote for further asset purchases. The pound took a pounding, falling over a cent to $1.5309.

There was unanimity in the decision to keep the bank's main interest rate unchanged at the record low of 0.5 percent.

Britain's economy has flatlined over the past year and there are fears it may enter its third recession in four years. In the final quarter of 2012, the British economy shrank 0.3 percent from the previous three-month period.

Even though the economy got smaller in the final three months of 2012, unemployment fell, official figures showed Wednesday.

The Office for National Statistics said unemployment fell 14,000 in the final quarter of last year to 2.5 million. The unemployment rate was 7.8 percent, down 0.1 percentage point on the previous quarter.