–Comments From Interview With CNBC TV
–Says Economy Still Very Precarious, Monpol Should Stay V Expansionary
–Squeeze On Households’ Income Seen Ending Soon
–That Will Change Consumer Spending ‘Dynamics’
–Wage Deals ‘Pretty Subdued’, Likely Inflation Will Continue Fall
–Re Further QE – ‘Will See Where We Are In May’

LONDON (MNI) – Bank of England Monetary Policy Committee Member
David Miles has defended his dissenting vote for stg75bn of extra QE at
this month’s meeting of the MPC.

Speaking to CNBC TV, Miles said that “my view was that, given the
outlook, it made sense to continue buying assets at the same pace that
the Monetary Policy Committee had following the monetary policy decision
made in October”.

In October, the MPC had decided to expand asset purchases by
stg75bn but this month’s decision to boost QE by the lesser amount of
stg50bn means a slower weekly pace of QE.

Miles conceded that one certainly couldn’t be sure about the “exact
extra demand” that would be generated by an additional stg5 to stg25bn.

“But it’s a big number so I wouldn’t want to suggest that there’s
no difference between expanding asset purchases by 50 and 75 (stg
blns)”.

“I think where the monetary policy needs to be right now is
maintain a very expansionary stance and try and boost demand as quickly
as possible and that was really the thinking behind expanding asset
purchases” at the February MPC Meeting.

As regards further asset purchases down the pipeline, Miles
responded by saying, “We will see where we are in May”.

But future decisions on QE could not be prejudged, he said.

Miles added, “This is a situation that changes quite significantly
from month to month at the moment and we will see where we are down the
road”.

That said, inflation developments appeared to be in line with the
BOE’s forecasts, he said:

“I think it is quite clear that wage settlements remain pretty
subdued and that is one of the reasons why it seems to me pretty likely
inflation will continue on the downward trajectory seen over the past
few months and that looks like it’s playing out in the way that we
forecast 6-12 months ago.”

Miles joined Adam Posen in voting for stg75bn extra QE at the
meeting, while a majority of the committee supported a stg50bn boost.

Miles said that there would be no return to the easy credit
conditions of 2006-07.

“I think it would be foolish to expect the availability nd cost of
credit to households and companies to go back to the relatively easy
conditions we were in the years leading up to 2006, 2007″.

But the crimp in household spending power would soon fade away as
inflation continued to fall, he said, and this should help consumption,
he added.

“Fairly soon – probably within the course of this year we will be
in a situation where – for most households – the squeeze on their
personal incomes is probably going to come to an end. The last few years
have been years in which, for most people if you have been lucky enough
top keep your job, the wage increase has been lower than the rate of
inflation and I suspect that that very unusual situation which has lasted
for a few years will end relatively soon”.

“I think that that will change the dynamics of consumer spending”.

That in turn would play into future decisions on asset purchases,
he said.

“It’s certainly the case that decisions we make on QE and on Bank
Rate will depend very much on how the real economy plays out and
consumer spending is a crucial component of that”.

–London newsroom 0044 20 7862 7492; email: dthomas@marketnews.com

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