BoE’s Saunders says more QE could dislodge price expectations

Bank of England policymaker Michael Saunders, who voted last month for an early end to the central bank’s asset purchases, said on Tuesday he feared continuing the programme could cause medium-term inflation expectations to rise.

“I also worry that continuing with asset purchases, when CPI inflation is 4% and the output gap is closed – that is the likely situation later this year – might well cause medium-term inflation expectations to drift higher,” he said.

“Such an outcome could well require a more substantial tightening of monetary policy later, and might limit the committee’s scope to respond promptly the next time the economy needs more stimulus,” he added.

Saunders said he believed the economy was now close to its pre-pandemic size.