Retiring Bank of England policymaker David Blanchflower said he feared his colleagues could quash any economic recovery by tightening monetary policy too soon, in comments reported in the Sunday Telegraph. Arch dove Blanchflower, who steps down from the bank's Monetary Policy Committee (MPC) at the end of this month, said a premature move could quash an upturn.
"What I'm most worried about is that the moment we start to see a recovery, the MPC stamps all over it and destroys it," he said. "It is still way too early to start talking about exit strategies."
Earlier this week, BoE Deputy Governor Charles Bean became the first policymaker to discuss in depth the options for tightening monetary policy and tackling future inflation risks. The central bank has cut rates to a record low of 0.5 percent and so far bought 64 billion pounds ($102 billion) of gilts - government bonds - to boost the economy.
Bean said on Thursday the bank did not have to sell back what could eventually amount to 125 billion pounds of asset purchases before raising rates. "The execution of our exit strategy will still present us with a tricky judgement call," Bean said.
Blanchflower, an outspoken academic who had long warned recession was coming, said it was too early to consider such plans. "The right tactics are now in place. We've gone into quantitative easing. We ought to have gone in earlier. But the last thing we should do is to squander that work by snatching it back too early," he said.
"I am concerned that the people who got it wrong on the way down will get it wrong on the way out, maybe even for the same reasons." Blanchflower said more than a year ago that his colleagues were "fiddling while Rome burns" and said in August interest rates had to come down very quickly when others on the MPC were thinking about hikes. The BoE has since had to slash rates.
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