Ex-BOE’s Miles: End QE early, drop guidance to increase ‘flexibility’

Ahead of the Bank of England’s (BOE) Super Thursday events, the central bank’s former Monetary Policy Committee (MPC) member David Miles said that the BOE should consider ending its current asset purchase programme early, in an interview with MNI on Wednesday.

He added that the MPC should also consider dropping forward guidance to increase ‘flexibility’ to either ease or tighten policy as needed.

“See little justification for completing the QE programme and place a heavy weight on the MPC giving itself the freedom to adjust policy in response to changing economic circumstances.”

“Relative to last November, when the current GBP150 billion of purchases was announced, economic circumstances have altered significantly.”

“We hadn’t seen inflation pick-up as much as it has, there was a projection that unemployment would be significantly higher by now than it turns out to be and that the bounce back in economic activity would not be as large as it has been.”

“A perfectly sensible reaction to this would be to say ‘look, we announced in November 2020 what we thought the right thing to do and set off on a trajectory that would be to buy GBP150 billion until roughly the end of this year Now we have got to August 2021 and things have changed. To stick to the original trajectory is not required by some notion of consistency of action.”

“See it as “hard to think” policy should be even more expansionary over the next 3 months.”

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