BoE’s David Miles says his vote for more QE is justified

Bank of England Monetary Policy Committee member David Miles says his decision to vote for more quantitative easing earlier this month looks to be justified due to weakness in the economy.

Miles was the only member of the MPC to call for an expansion of monetary policy earlier this month.

Fellow MPC member Adam Posen voted to keep QE at £325bn despite having called for the programme to be increased for months. The committee voted unanimously to keep base rate at 0.5%.

Speaking to Bloomberg television, Miles said a weakness in the economy justifies his call for QE to be increased.

He says: “The weakness of demand, given the amount of spare capacity in the economy, still made a strategy of having monetary policy even more expansionary the right one. On reflection that seems to me still the right strategy.”

Miles added that inflation, which increased from 3.4% to 3.5% in February, would be slightly higher than expected in the near term but is likely to fall below the BoE’s 2% target by the end of the year.

He said: “The inflation outlook in the very near term is for slightly higher inflation than I had thought. But if you look beyond that, the bigger picture remains one where the domestically generated inflation pressures in the UK really are very low.

“More likely than not, inflation will go back to the target level and quite likely sit beneath it if you look beyond the next six to nine months.”

When asked whether he thought house prices would remain stagnant, Miles says: “I think it is both highly unlikely and highly undesirable that we get back to a situation we were in the few years leading up to the financial crisis which starts really in 2007.”