For the first time in quite a while, the Monetary Policy Committee of the Bank of England has today made a knife-edge decision which genuinely might have gone either way. The outcome, which was to leave the total of quantitative easing unchanged at £325bn, tells us something about the inflation fighting credentials of the MPC, which have been widely questioned in the financial markets. And it also tells us something about the way in which other central banks, including the Fed, might react to similar, if less strained, economic circumstances in coming months.

The Bank of England has been on a mission in the past two years. That mission has been to participate, possibly a little too enthusiastically at times, in a plan to change the fiscal/monetary mix in the UK, and to support the Coalition’s plan to reduce the budget deficit on an accelerated timsescale. The MPC has therefore delivered the largest dose of monetary easing among the major economies, and has acquiesced to a prolonged period in which UK inflation has exceeded targets by very significant amounts. From my vantage point, while inflation and unemployment have both been far too high, there were few better policy options available at a time of enormous difficulty for both the Treasury and the Bank.