LONDON (SHARECAST) - Writing in the Evening Standard, Bank of England Monetary Policy Committee (MPC) member David Miles said today that there was no compelling case for the MPC to consider alternatives to “conventional QE” (ie, the purchase of government bonds) for two reasons.
First, he disputed the notion that weak aggregate demand showed that policy had become ineffective. He said other factors, such as the euro crisis, had restrained spending and that monetary loosening had been a significant opposing force.
Second, he said the suggestion that the MPC might undertake a pure “helicopter drop” of money – for example, by money financing a lump-sum “Christmas bonus” for every household – was unattractive because such a move could be hard to reverse.
Conventional QE, by contrast, gave the MPC the option of reversing the policy should the inflation outlook become a concern.