Bank of England’s Timothy Besley says it’s too early for the bank to judge when it will need to start unwinding the massive stimulus it has delivered to the economy.
Besley told a conference “Just as with monetary policy conducted by adjusting the bank rate, there is little point now in trying to speculate about the quantitative nature of the trigger events in the data that would lead to policy tightening” adding “it will be the forward-looking implications of these data that are essential to any such decision”
Besley feels worries QE and record low interest rates will drive inflation above the target rate are underminned by the fact that inflation expectations remain anchored close to 2% and financial markets are still in a state of disarray.
Besley says the QE strategy had been designed to target medium-term gilts in order to reduce the risk of banks hoarding liquidity, which would have been greater if it had focused in shorter maturities.
He feels it is too early to know if the policy is having the desired macroeconomic effect, saying “We will not know for sure whether the QE has been directly effective in supporting nominal demand growth for some time, and a definitive assessment right now would certainly be premature.”