The second member of the Monetary Policy Committee hinted at the need for the Bank of England to tighten UK monetary policy

The possibility of the Bank of England’s monetary policy tightening has increased because the second member of its interest rate-setting committee said that he might vote to cut its bond purchase plan as early as next month.

Michael Sanders, an external member of the Monetary Policy Committee who was once known as a dovish, said that action should be taken to curb inflation before the effect of the UK’s September cancellation of vacation plans becomes apparent.

The Deputy Governor of the Bank of England Sir Dave Ramsden said that he made the remarks shortly after Wednesday’s official data showed that prices rose and he also changed his views on inflation. 2.5% From one year to June.

Sanders said that economic trends since May require a different stance. If they continue, “in order to keep the inflation rate back to the 2% target, it may soon become appropriate to withdraw from some of the current monetary stimulus measures.”

“Options may include scaling back the current asset purchase plan — ending in the next one or two months and before buying the entire £150 billion — and/or taking further monetary policy actions next year,” he said in an online network Added at the seminar.

Michael Sanders stated that a moderately tightening policy stance would be “more akin to relaxing the accelerator rather than applying the brakes” ©Financial Times

Sanders hinted that he was prepared to change his vote at the August 5 meeting. His views will be regarded as important because he is known to support extremely loose policies during the pandemic.

Sanders and Ramsden’s views are consistent with the Bank of England Governor Andrew Bailey’s insistence that the bank does not have “Howling in the wind“As inflation is out of control, it is correct not to take any measures to curb price increases.

In his speech, Sanders emphasized why he disagreed with the governor’s position in early July. He predicted that by the end of the year, inflation may rise by nearly 4% before slowing down, but this rise increases the risk that inflation will continue to rise.

“Tighten moderately [monetary policy] attitude. .. Will help to ensure that the inflation risk for the next two to three years is balanced near the 2% target, rather than tending to the upside (which I suspect is the current policy stance),” Sanders said.

He added that this will ensure a smooth change in policy and is “more like easing the throttle rather than applying the brakes.” He said he believes that the conditions set by the Monetary Policy Committee for tightening policy are now met.

Sanders added that waiting for the full impact of the vacation plan to end is meaningless because it means that action will not be taken until at least February, and “will increase the risk of higher inflation expectations in the coming months”.

“For me, the question of whether to reduce our current asset purchase plan ahead of time will be considered at our upcoming meeting,” Sanders said, but he warned that this was not an announcement of his intention to vote.

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