The MPC may announce a further £50 billion of asset purchases next week, according to the “MPC-ometer” model described in previous posts – despite there being no compelling monetary case for such action, as argued yesterday.

The “MPC-ometer” forecasts the monthly policy decision based on economic data and financial developments since the prior vote. It correctly predicted that the Committee would shift to an easing bias in August, with Weale and Dale retracting their rate-hike call.

With 10 of the 12 inputs available, the model suggests a 5-4 vote in favour of easing action, which would probably take the form of a further £50 billion of gilt purchases, as recommended by Posen since October last year.

The final reading will depend on the manufacturing and services PMI results to be released on 1 and 5 September respectively.

The further dovish shift this month reflects the financial components – in particular, lower share prices and wider credit spreads – although there was a small contribution from a drop in consumer confidence. (Confidence, however, remains well above its April low.)

High current inflation may be less of a constraint on the MPC than widely assumed, with the doves, including the Governor in his latest exculpatory letter, claiming that the headline CPI rate would be below 2% but for “temporary factors” – a dubious assertion that confuses accounting arithmetic with economic causality.

The MPC could defend an expansion of gilt purchases by pointing out that a further £50 billion of buying would return the Bank’s share of the stock of market-held gilts to about the level it reached (26%) at the end of “QE1” in January 2010.