BoE hawk Michael Saunders said he believed that the economy was now close to the pre-pandemic level. He’s worried that continuing with the asset purchase program would cause rise in medium-term expectation.
“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.
