BOE's Saunders: We no longer need as much stimulus as previously
Remarks by BOE policymaker, Michael Saunders
That pretty much sums up the situation and pressure faced by the central bank at this point in time. But as mentioned previously here, any tapering at this stage makes little difference though perhaps it may have more symbolic implications.
- Worry that continuing asset purchases when CPI is 4% might cause medium-term inflation expectations to drift higher
- This could cause a more severe monetary policy response later
- Says that should ease off the accelerator rather than apply brakes
- If bank rate does rise in next year or so, it would be relatively limited
- UK will not face a persistent inflation problem
The key thing that policymakers want is flexibility and when it comes to dealing with high inflation which could persist for many more months, that means having the ammunition i.e. rate hikes to respond to the situation.
As such, they have to take some first steps in removing the pandemic support first.