Bank of England policy maker Martin Weale said there’s no need for officials to pre-announce any expansion of further stimulus until the current program’s completion unless the outlook deteriorates “very sharply.”
“I don’t see a strong necessity or indeed case for wanting to announce now further purchases that we could implement only after our current purchases are completed,” Weale said in an interview with Bloomberg Television yesterday in London at the National Institute of Economic and Social Research. “If things were to deteriorate very sharply, then that view may change.”
Weale said in a speech earlier that the central bank’s forecast for inflation to probably undershoot the 2 percent goal suggests “a strong case” for policy makers to expand stimulus next year. Some policy makers this month said more bond buying may be needed in future after they expanded their purchase program in October to 275 billion ($426 billion), expecting to complete them by February.
“There is a limit to the extent to which we can actually intervene even more in markets until the current round of purchases is completed,” Weale said. Still, “the inflation forecast that we produced in November does suggest that next year there’s likely to be a strong case for further quantitative easing.”
The central bank has kept its benchmark interest rate at a record low of 0.5 percent since March 2009, when it also began its quantitative easing program to fight the recession. When asked if monetary policy is likely to stay loose for some time, he said “I think that’s quite likely.”
“Certainly, if you look at markets’ expectations of future bank rate, then no-one’s expecting an early increase” of interest rates, Weale said.
Weale said in his speech that the U.K. is experiencing the slowest economic recovery since World War I. With the crisis in the euro region threatening Britain’s economic growth, the Bank of England slashed forecasts for growth and inflation last week.
Questioned today on the bank’s contingency plans for a euro area breakup, Weale said that people are thinking about such a possibility more now than they were six months ago and that “obviously, it would be disruptive.”
“Our banks are in much better shape than they were a few years ago,” he said. “The Bank of England has thought rather more about ways in which it can provide liquidity.”