Bank of England may need fresh QE of up to £175bn, senior policymaker says

http://www.guardian.co.uk/business/2013/feb/21/bank-of-england-restart-qe

Version 0 of 1.

The Bank of England has a case for restarting its quantitative easing (QE) programme, and may need to purchase assets worth as much as £175bn if the economy is running substantially below capacity, a senior policymaker has said.

In a speech on Thursday, David Miles gave a detailed model of how policy should respond to the amount of slack in the economy. The Bank has generally avoided doing so before, and the move is in line with the direction of policy guidance favoured by its incoming governor Mark Carney.

Miles is an external member of the Bank's monetary policy committee, and until this month he was alone in voting for an extra £25bn of asset purchases.

This month he was joined by the outgoing governor, Mervyn King, and markets expert Paul Fisher, prompting economists to pencil in a possible restart of the bond purchase scheme.

The amount of slack in the economy appeared to be the most influential variable in Miles's model. In the central case that the amount of slack was estimated to be equivalent to between zero and 3%of annual output, it would point to £60bn more of asset purchases, he said.

If slack were somewhere in the range of zero to 6%, it would point to purchases worth £175bn.