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LONDON, Nov 18 (Reuters) - The Bank of England's Monetary Policy Committee was split three ways in November, with seven members backing the 25 billion pound boost to the economy, one wanting more and another calling for no increase at all.
Minutes of the Nov 4-5 meeting published on Wednesday also showed the MPC discussed the merits of cutting the remuneration rate the BoE pays on a proportion of commercial bank reserves, and said this could be an option for the future.
Short sterling futures leapt on this news, while the pound fell more than half a cent against the dollar and gilts rose as the tenor of the MPC debate kept alive the possibility of more stimulus to the recession-hit economy.
Most analysts had concluded earlier this month that the BoE's decision to halve the pace of its asset purchases was a signal the programme was being wound down.
But BoE Governor Mervyn King said last Wednesday that the MPC was keeping an open mind and the latest minutes have done little to clarify the outlook.
"I was hoping the minutes would lift some of the uncertainties surrounding the Inflation Report projections. At first glance that hasn't happened," said Philip Shaw, chief economist at Investec.
While the majority of the MPC wanted a 25 billion pound expansion to the QE programme -- as the asset purchase scheme to boost the economy is commonly called -- David Miles called for it to be increased by 40 billion pounds in "order to provide greater insurance to the downside risks to growth and inflation".
BoE chief economist Spencer Dale, however, favoured no increase at all, arguing that more money pumped into the economy might fuel "unwarranted increases in some asset prices that could prove costly to rectify.
"There is an awful lot of debate on the committee and a lot of uncertainty about what the right thing to do is," said Colin Ellis of Daiwa Securities.
Perhaps the biggest surprise was that the MPC was still thinking about changing the remuneration structure on commercial bank reserves -- a topic much speculated on earlier in the year but then apparently kicked into the long grass.
"A reduction in the rate of remuneration relative to Bank Rate on a proportion of commercial bank reserves would bear down on short term market rates and could ease monetary conditions further," the minutes said.
Policymakers left this option open for the future but concluded that asset purchases were currently a more effective instrument to boost the economy.
The MPC was agreed that any increase to the asset purchase scheme in November should be conducted over three months as the best time to make any change to the programme would be in February, when the MPC would have its new forecasts for the economy. (Editing by Andy Bruce)