Rather than selling the government bonds it bought in the now-£375bn QE scheme, the Bank will slowly bring interest rates back up in order to tighten policy, said Miles, who sits on the Bank’s rate-setting Monetary Policy Committee.
He justified this method by arguing that it would be less costly to reverse any tightening that came too early.
He added that it could promote financial stability by putting less pressure on banks and building societies whose lending is indexed on the bank rate but who borrow in markets affected by QE.
“At some point it will seem right to scale back the degree to which monetary policy is exceptionally expansionary,” he said. “No one will be sure when that time has come.”
However, he defended the Bank’s current expansionary strategy, adding: “I believe the evidence is that it has had a significant positive effect.”