The Bank of England Monetary Policy Committee split three ways over its decision to hike Bank Rate by 50 basis points at its September meeting but members were united in voting to start active gilt sales.
Three members, Catherine Mann, Deputy Governor Dave Ramsden and Jonathan Haskel all voted for a 75 basis point hike, with newcomer Swati Dhingra backing only a 25 basis point increase. They all voted in support of starting active gilt sales in line with the schedule set out in August, cutting the stock of gilt purchases by GBP80 billion over the next 12 months, with some GBP40 billion coming through active gilt sales.
The MPC's approach is clear, to use Bank Rate as the active policy instrument with sales ticking away in the background with a high threshold to changing the sales schedule.
The MPC reaffirmed that it would not vote at each policy meeting on the target level for its stock of gilts and that "there would be a high bar for amending the planned reduction."
On current plans, gilt holdings will be cut to GBP758 billion over the next 12 months.
The detailed market notice set out sales for Q4, with fifteen auctions planned for GBP580 million per auction and GBP8.7 billion in total, distributed evenly across short, medium and longs.
ENERGY PRICE CAP
The MPC took into account the pre-announced energy price cap, which Bank economists assessed would lower the inflation peak in October to just below 11% but there was no discussion in the minutes of the new fiscal package due to be published Friday.
The MPC said it would look at its impact in its November forecast round but that the Energy Price Guarantee (EPG), capping fuel bills for two years, would in itself "add to inflationary pressure in the medium term."
For the three members backing a hike, faster tightening now was justified to reduce more prolonged tightening later and the government energy price policy would add to demand pressure.
The five backing fifty saw the case for a forceful policy response and agreed that the EPG added to inflationary pressure down the track but noted the November forecast round would give them time for a full assessment and that lower near term inflation should rein in expectations.
Debutant Dhingra did consider a 50bps hike, but held back on the growth outlook.
In its economic assessment the MPC saw evidence of further weakness in activity, with Bank Agents reporting that firms anticipated consumer spending peaking in Q3.