The newest member of the Monetary Policy Committee has said he would be open to more QE, despite questioning its effectiveness.
Gertjan Vlieghe, who has joined the Bank of England committee from Brevan Howard Asset Management, was addressing the Treasury Select Committee as part of the confirmation process for his appointment.
The Belgian-born economist was asked by committee member Steve Baker whether the MPC had the tools to do its job, given the low level of interest rates and the uncertainty in the global economy.
Mr Vlieghe said: “I do think we have the tools. We can cut rates if we judge it necessary, if we were to be hit by further disappointment, we can also restart the asset purchase programme.
“I agree with the findings of many researchers that the effectiveness of the asset purchase programme has probably declined over time, each successive wave is a little more powerful than the last one but that’s not to say we have no more tools it just means we have to scale it appropriately.”
Mr Vlieghe added that in his view the risks in the global economy are skewed to the downside and said he would want to see a “more convincing broad-based upward trajectory” in inflation before voting for an interest rate rise.
Fund manager view
John Greenwood, chief economist at Invesco, said: “With CPI inflation in August back down to 0 per cent from a year before it is likely that the MPC will continue to keep interest rates unchanged at 0.5 per cent in the near term.
“The risks are currently tilted towards slower growth and near-deflationary conditions. For this calendar year I now expect 2.6 per cent real GDP growth and 0.4 per cent CPI inflation.”
