Asset prices, saving and the wider effects of monetary policy - speech by David Miles

In a speech delivered at the pro.Manchester Business Conference, David Miles – External Member of the Monetary Policy Committee – describes how he sees the current stance of monetary policy. He considers how asset purchases might be affecting the economy, and assesses the view that such asset purchases are causing particular harm to those saving for retirement.
Published on 01 March 2012

Miles begins by discussing the inflation projections outlined in the February Inflation Report. The inflation projection fan chart is based on the assumption that the first increase in Bank Rate might not come until the second half of 2014, which is what is implied by current market yields. Miles notes that different assumptions about monetary policy could deliver an inflation projection with the risks around the inflation outlook, relative to the target, broadly balanced by the end of the forecast period. “For example, it is possible that a path for policy that was looser in the near term but was then tightened at an earlier point would result in a similar outturn for inflation as in the fan chart. And it might be the case that a path such as that could be a better one for the economy. Aggressively loosening monetary policy now might bring us closer to the point at which Bank Rate could be moved back towards a more normal level. This is an argument which influences the way I see monetary policy today.”

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