LONDON (Reuters) - Bank of England policymaker David Miles said the chances that the central bank’s quantitative easing policy would lead to a future surge in inflation were low.
“The risk that large-scale asset purchases will generate very substantially higher rates of inflation is a risk that’s often overemphasised, I believe,” he said in an audio interview hosted on economic policy website Vox.
Miles added that he believed the maximum boost that the BoE’s 375 billion pounds of gilt purchases had provided to the British economy was equivalent to around 2 percent of national output, close to earlier BoE estimates.
Miles said he did not believe gilt purchases in Britain had blurred the boundary between fiscal and monetary policy, especially as the BoE had committed to sell back the gilts it had bought.
However, a recent paper co-authored by Miles, which was the subject of the interview, did raise the possibility that global central banks’ asset purchases could be fuelling an unsustainable build-up of public borrowing.
“Perhaps most concerning is whether central bank purchases of government bonds are helping to contribute to unsustainable levels of government debt. These are all contentious issues with proponents on both sides,” the paper in the Economic Journal of Britain’s Royal Economic Society said.
Reporting by David Milliken and Olesya Dmitracova