The external member of the Monetary Policy Committee of the Bank of England, Michael Saunderssaid on Monday that you are not comfortable with the current situation of inflation expectations. He further added that interest rates below 1.0% are clearly below the neutral rate in the UKas reported by Reuters.
“UK interest rates may need to be above neutral if inflation expectations rise,” Saunders said, though he did not outline exactly where he thinks the neutral rate is.
The official pointed out that “there are good reasons to expect that the effect on the economy of the sale of securities will be less than that of their initial purchase. This is because the sale of these securities does not contain a policy signal from the BoE, difference from purchases,” he said.
“The BoE’s benchmark interest rate is the bank’s main tool to tighten policy. Equity sales are a complement, not a substitute.”
Source: Fx Street
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