Vote to increase QE justified, says MPC’s David Miles

Bank of England Monetary Policy Committee member David Miles says his decision to vote for more quantitative easing earlier this month looks 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 was unanimous in keeping the base rate at 0.5%.

Speaking to Bloomberg television last week, Miles says a weakness in the economy justifies his call for QE to be increased: “Weakness in 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 still seems to me the right strategy.”

Miles added that inflation, which rose 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 Bank’s 2% target by the end of the year.

He adds: “The inflation outlook in the 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 are low.

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