BOE's Saunders is saying:
- Vote for a 50 basis point hike in February does not necessarily imply that I believe that the level of rates one or two years ahead will be higher than the yield curve used for the February MPR
- All else equal, prompt tightening now could help limit the total scale of tightening that will be needed to return inflation to target
- My preference for a 50 basis point hike at the February meeting does not necessarily imply I will vote for a 50 basis point step in the event that rates have to rise further
- Important to distinguish between the pace of tightening and the level of the rate at the end of a tightening cycle
- Quicker tightening early on could help limit the overall tightening cycle
- Risks are on the side of stronger and more persistent inflation pressures then implied by the February MPR forecast
- Some further modest tightening in monetary policy is likely in coming months to return inflation to target
- Recent strength and energy prices likely to lift CPI inflation further in coming months
- Case for policy to move in a larger step probably is greater when bank rate is clearly further away from the approximate level that, if maintained, would return inflation to target
- Not in favor of aiming to restore the lost potential output by running the economy hot
- Expects energy effect on inflation to be temporary
- Maintaining a relatively loose policy under current conditions would be likely to produce a further undesirable rise in inflation expectations.
- Such an outcome would be costly to reverse and could limit the scope for prompt monetary easing the next time the economy needs support
Sauders wanted to raise rates 50 basis points at the last BOE meeting
