* BoE's Dale wanted no QE increase,Miles wanted bigger boost
* Cut in reserve remuneration rate a future option
* UK factory order balance highest since Dec - CBI
(adds Barker comments, BoE numerical forecasts)
By Sumeet Desai and Christina Fincher
LONDON, Nov 18 (Reuters) - The Bank of England's Monetary Policy Committee split three ways in November, with seven members backing a 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 cutting the remuneration rate the BoE pays on a proportion of commercial bank reserves to encourage lending, saying it could be an option for the future.
Short sterling futures leapt, while the pound fell more than half a cent against the dollar as the tenor of the MPC debate kept alive the possibility of more stimulus to the recession-hit economy.
The BoE's decision earlier this month to increase asset purchases by 25 billion pounds ($42 billion) -- half the boost agreed in August -- was widely interpreted as a signal its quantitative easing effort was being wound down.
But last Wednesday, Bank Governor Mervyn King said policymakers were "completely open-minded" on whether further stimulus would be needed.
Wednesday's minutes, which revived the debate over a reserves cut but showed less support for a bigger QE boost than some anticipated, did 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.
Much of the confusion stems from the BoE's quarterly projections last week which suggested the economy could recover strongly while generating very little inflation. The numerical parameters for these forecasts were published on Wednesday and show the central bank is counting on growing at a rate of over 4 percent in 2011 even if interest rates rise towards the end of next year as markets expect.
At the same time, the BoE is forecasting inflation of 1.65 percent on a two-year horizon, below its 2 percent target. [http://www.bankofengland.co.uk/publications/inflationreport/09novirprob.xls]
ALL OPTIONS OPEN
While the majority of the MPC wanted a 25 billion pound expansion of the QE programme, 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".
"I think the MPC seem to be seeing icebergs on both sides of the ship and are keeping watch accordingly," said Peter Westaway, chief European economist at Nomura.
"I doubt they engineered a three-way split but it's quite convenient at the moment. It allows a focus that QE might not work as well as people are thinking, but also that there could be lots of upside risks in which case rates may need tightening sooner."
Recent economic data has pointed to a brighter outlook, suggesting Britain's economy will pull out of recession before the end of the year.
House prices, retail sales and consumer confidence have all rebounded strongly and figures from the Confederation of British Industry on Wednesday showed factory orders were falling at their slowest pace since last December. [ID:nLI645927]
In an interview with a regional newspaper, Kate Barker, one of the central bank's external policymakers, said the economy would return to growth in the fourth quarter but unemployment could continue to rise for another six months or so.
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.
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 agreed the 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 they would have their new forecasts for the economy.
The committee also voted unanimously to leave interest rates unchanged at 0.5 percent, as expected. http://www.bankofengland.co.uk/publications/minutes/mpc/pdf/2009/mpc0911.pdf (Editing by Ron Askew)