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Bank of England monetary committee sees reduced risks

The Bank of England
Image caption The Bank of England says the threat from the eurozone has reduced

The Bank of England's Monetary Policy Committee (MPC) has said that the risk of a "severe dislocation" to the banking system has reduced.

The minutes from the MPC's meeting earlier this month showed members voted unanimously to hold interest rates and continue with quantitative easing (QE).

However, the minutes also showed members were split about whether the bank should expand QE in 2012.

The nine members agreed that inflation was likely to fall sharply in 2012.

Reduced risk

In the minutes the bank noted the success of recent interventions by the European Central Bank (ECB) to lend money to European banks.

It said this had already significantly increased the amount of money they were willing to lend and decreased the chance of the sovereign debt crisis spilling over into the banking system.

"The immediate risk of a more severe dislocation in the euro area arising from banking sector difficulties appeared to have been mitigated by the ECB's actions," the committee said.

However, the bank warned that "downside" risks to the economy remained from a possible recession in the eurozone and falling demand in the UK.

Quantitative easing

At the meeting in early January members voted unanimously to continue the banks latest £275bn quantitative easing programme started in October.

The committee said in the latest minutes it would take until February to complete.

Members were split as to whether the UK economy was likely to hit its inflation target, or undershoot it - justifying further QE.

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