The Bank of England may need to stop its bond-buying stimulus programme earlier than planned, due to the risk of rising inflation, according to policymaker Michael Saunders.
In a speech this morning, Saunders says that activity appears to have recovered “a bit more than expected” back in May, when the Bank drew up its latest economic forecasts.
And in a clear signal that the central bank could decide to stop its current quantitative easing programme of government bond purchases early, he says:
In my view, if activity and inflation indicators remain in line with recent trends and downside risks to growth and inflation do not rise significantly (and these conditions are important), then it may become appropriate fairly soon to withdraw some of the current monetary stimulus in order to return inflation to the 2% target on a sustained basis.
Options would include “curtailing the current asset purchase program”, and ending it in the next month or two, Saunders says, “and/or further monetary policy action next year”.
Otherwise,…
