LONDON (MNI) – Aggressively loosening monetary policy now could
speed up the return to more normal levels of Bank Rate, Bank of England
Monetary Policy Committee member David Miles says.
Miles outlines a case for ultra loose monetary policy now to
support the economy, and then raising Bank Rate before the market had
been expecting – the second half of 2014. Miles voted for stg75 billion
in quantitative easing at the February meeting, when the MPC settled for
stg50 billion, and he argues looser policy now and then earlier
tightening of policy could get inflation on track.
The February Inflation Report, on its fan chart projections, shows
CPI falling well below its 2.0% target before back to just under it at
the two and three year forecast horizons.
“It is possible that a path for policy that was looser in the near
term (more asset purchases) but was then tightened at an earlier point
(a rise in Bank Rate sooner than the second half of 2014) would result
in a similar outturn for inflation as in the fan chart,” Miles says.
“And it might be the case that a path such as that could be a
better one for the economy. Aggressively loosening monetary policy now
might bring us closer to the point at which Bank Rate could be moved
back towards a more normal level,” Miles added.
In his speech at the pro.Manchester business conference Miles
looked at the way QE works.
He said its impact is across a range of assets, through portfolio
effects, and much wider than its impact on the Gilts the BOE has
purchased in large quantities.
He attacked the argument QE has hit pensioners and savers hard, as
it has driven up the value of many of the assets held by pension
schemes.
“Close to 60% of the assets held by company pension schemes have
seen very large increases in value in the period since the asset
purchases began,” Miles said.
–London newsroom 0044 20 7862 7491; email: drobinson@marketnews.com
[TOPICS: M$$BE$,MT$$$$]
