— Adds Detail, Quotes To Version Transmitted At 1038 GMT
— Adds Comments On Downside Risks To Inflation
— Adds Comments On QE Decision Being ‘Tight-Run’

DUBLIN – Bank of England Monetary Policy Committee member
David Miles has told an audience here that he thinks additional
quantitative easing remains a “powerful tool” at the Bank’s disposal and
“one which we may come to use”.

Miles said that making additional asset purchases was not an
“obvious” choice at present and that he was yet to make up his mind on
whether he thought it was a good idea.

When pressed further about whether the market’s expectation for
further quantitative easing was correct, Miles declined to comment,
instead saying that “it’s a tight-run decision for any individual
member.”

“I cannot predict how I’m going to vote one or two months in the
future,’ he added.

Earlier Miles had said that he though it was good that the BOE
had quantitative easing at its disposal.

“I think we’re in a good situation, where even though interest
rates have been effectively cut to zero, our options are not simply how
much do you tighten, I mean, you do have a tool, quantitative easing,
which I think (fellow MPC member) Adam Posen coherently explained
remains a powerful tool and one which we may come to use. I think it’s
very helpful that that is the case,” he said.

Miles said he was yet to make up his mind on whether more QE would
be needed, adding that there is a risk monetary policy could be left too
loose, too long and that any decision on additional asset purchases
would depend on future economic data.

“It’s not obvious what the next direction for monetary policy is.
We face the difficulty of trading off these two big risks and as we get
more information about how things are playing out and where the risks
are moving. I think those are the things that will determine what we
do,” he said.

Whilst Miles said he thought there was a ‘substantial risk’ that
inflation could remain significantly above target, he hinted that he was
more concerned about downside risks to CPI and that he feared tightening
monetary policy could leave the UK with below-target inflation in the
medium-term.

“Maybe even a larger risk is that if we normalise monetary policy
too quickly and knock on the head a recovery that only is only just
embryonic and actually it turns out that inflation pressures, 12-18
months down the road, when the change in VAT has worn off and the
effects of the past depreciation of sterling have fed themselves
through, the risk is we have inflation pressures that sit well-below
target, and that we would have tightened monetary policy too quickly,”
he said.

contact: email: wwilkes@marketnews.com

[TOPICS: M$B$$$,M$$BE$,MSSFX$]