A senior member of the Monetary Policy Committee (MPC) warned yesterday the UK economy faced a real danger from the?Bank of England tightening monetary policy too early.
During a speech in Dublin David Miles said the MPC faced a risk of “tightening monetary policy too soon” adding the UK economy faced an uncertain future.
He said the economy was far from displaying the typical features of “a strong cyclical upswing,” such as a rapid growth in lending and in the money supply, wages pressure or business or household confidence.
While his comments do not go as far as suggesting Miles is in favour of the Bank restarting quantitative easing (QE), they do put him at odds with fellow MPC member, Andrew Sentance, who is known to favour tighter fiscal policy having voted for an increase in the Bank rate consistently in recent months.
Speculation the Bank may restart QE has been growing in recent weeks with MPC member Andrew Posen calling for the policy recently, warning the UK faces a lost decade similar to Japan in the 1990s if it does not.
Miles said inflation could also remain above target for several years.
He said “UK inflation now sits uncomfortably above the target. But I believe that this tells us rather little about the cyclical position of the economy or where inflation will be in future.”