BoE's Saunders Says Additional Stimulus Probably Required To Lift Inflation

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Additional monetary policy easing would be required to bring inflation to the target, Bank of England Monetary Policy Committee Member Michael Saunders said Friday.

“I consider it quite likely that additional monetary easing will be appropriate in order to achieve a sustained return of inflation to the 2% target,” he said in an online webinar.

“There is no automatic time limit on our willingness to maintain a loose monetary policy stance,” he said.

At the August MPC meeting, the BoE had forecast inflation to turn briefly negative in the near term, falling to -0.3 percent in August driven by VAT cut and ‘Eat Out to Help Out’ scheme.

Saunders said the BoE does not intend to tighten policy until there is clear evidence that significant progress is being made in eliminating spare capacity and achieving the 2 percent inflation target sustainably.

Further, he said the faster-than-expected rebound in the economy over the last few months has reflected a benign window in which large fiscal support has coincided with the relaxation of lockdown measures and low infection rates. “This window may now be closing,” he said.

A downside scenario to the economy would be very costly, the banker added.

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