BoE may need to end bond-buying early as inflation mounts-Saunders


FILE PHOTO: The Bank of England and the City of London financial district in London, Britain, November 5, 2020. REUTERS/John Sibley//File Photo

July 15, 2021

LONDON (Reuters) – Bank of England interest rate-setter Michael Saunders said on Thursday that the central bank could decide to stop its current programme of government bond purchases early due to an unexpectedly sharp rise in inflation.

British consumer price inflation jumped to 2.5% in May, data showed on Wednesday, and Saunders said continuing bond purchases later this year – when price growth could exceed 3% – risked entrenching inflation expectations.

“For me, the question of whether to curtail our current asset purchase program early will be under consideration at our forthcoming meetings,” he said in a speech.

“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 … then it may become appropriate fairly soon to withdraw some of the current monetary stimulus,” he added.

The BoE committed in November to buy a further 100 billion pounds ($139 billion) of government bonds over the course of the following year. Chief Economist Andy Haldane was a lone voice at May and June’s Monetary Policy Committee meetings – his last before leaving the BoE – to call for the scheme to be ended early.

On Wednesday, Deputy Governor Dave Ramsden said inflation could hit 4% this year, and the BoE could need to reverse its monetary stimulus sooner than he had expected.

($1 = 0.7203 pounds)

(Reporting by David Milliken; Writing by William Schomberg)

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