Bloomberg News

BOE’s Dale Says Inflation Means More QE Is Not a ‘No-Brainer’

September 29, 2011

Sept. 29 (Bloomberg) -- Bank of England Chief Economist Spencer Dale said accelerating inflation means restarting asset purchases is not a “no-brainer,” indicating he may have reservations about further stimulus.

“We need to think about the upside risks to inflation as well as the downside risks,” Dale said in an interview with the Daily Mail newspaper published in London today. “If it were a no-brainer, we would have done it already.”

Bank of England officials are moving closer to adding additional stimulus, with most of the nine Monetary Policy Committee saying this month that more bond purchases are “increasingly probable.” While Dale sees inflation exceeding 5 percent in the coming months, he also noted that the global slowdown now looks “more persistent.” The MPC holds its next policy meeting on Oct. 5-6.

“If things continue to deteriorate, we may need to consider further monetary loosening,” Dale said. “If we need to do more, then I’m sure the committee will do so and importantly, if we do loosen monetary policy further, we have the tools available to do so.”

Adam Posen was the only MPC member to vote for more so- called quantitative easing at this month’s meeting. Ben Broadbent said on Sept. 26 that he was “reasonably close” to voting for more QE, while David Miles said the case for stimulus has become more “finely balanced.”

‘Opposite Direction’

On interest rates, all nine MPC members voted to keep the benchmark at a record low of 0.5 percent this month. Dale had voted for rate increases from February to July to tame inflation that’s more than double the bank’s 2 percent target.

Earlier this year, the “momentum was toward at some point raising rates, but it’s shifted in the opposite direction,” the newspaper cited him as saying.

While Dale said he’s “pretty confident” that inflation will ease “very sharply at the turn of next year,” there is uncertainty over how much it will “fall back and how quickly.”

ABN Amro Bank NV changed its forecast this week and said the Bank of England will restart asset purchases at next week’s assessment. Citigroup Inc. forecasts the Bank of England may purchase as much as 400 billion pounds ($626 billion) of bonds in a new round of QE. The purchases may resume as early as the Oct. 6 decision, it said this month.

--Editors: Simone Meier, Andrew Atkinson

To contact the reporter on this story: Fergal O’Brien in London at fobrien@bloomberg.net

To contact the editor responsible for this story: Matthew Brockett at mbrockett1@bloomberg.net


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