By Paul Dobson Nov. 18 (Bloomberg) -- The pound fell against the euro after minutes from this month’s Bank of England meeting showed policy makers split three ways on whether to extend their debt- buying plan and discussed cutting the deposit rate on reserves. Sterling snapped a four-day gain versus the 16-nation currency and was little changed versus the dollar. A majority of policy makers voted on Nov. 5 to boost the asset-purchase plan by a less-than-forecast 25 billion pounds ($42 billion), minutes published today showed. One member of the Monetary Policy Committee favored no change and one voted for an expansion. “It’s very inconclusive,” said Peter Frank, a currency strategist in London at Societe Generale SA. “The two camps don’t seem to be agreeing. We’re coming to the end of the quantitative-easing process and people are worrying over how the inflation risk plays out ahead.” The pound weakened 0.6 percent to 88.99 pence per euro as of 11:40 a.m. in London, and traded at $1.6819. The Bank of England Monetary Policy Committee has been divided between those who favor more aggressive action to overcome the longest recession on record and others who have said the stimulus measures may already be succeeding. Chief Economist Spencer Dale favored no change at the Nov. 5 meeting, according to the minutes. He said that an increase in the bond plan posed a risk to inflation, and “might result in unwarranted increases in some asset prices.” ‘Useful Policy Tool’ David Miles sought a 40 billion-pound expansion to “provide greater insurance against the downside risks to growth and inflation arising from constrained credit supply.” The committee agreed that reducing the deposit rate “might be a useful policy tool in some circumstances, and therefore should be available in future,” according to the minutes. The pound traded at a three-month high of $1.6878 two days ago and a two-month high of 88.34 pence per euro yesterday. The yield on the U.K.’s short-sterling interest-rate futures contract expiring in September 2010 declined 7 basis points to 1.45 percent as investors raised bets that borrowing costs will stay lower for longer. The yield on the 10-year gilt rose 1 basis point to 3.68 percent and the two-year note yield slipped 3 basis point to 1.24 percent. To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net

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