MNI: BOE MPC Members - No QE Unwind Soon; May Be Very Gradual

By David Robinson

     LONDON (MNI) - Bank of England Deputy Governor Jon Cunliffe said Tuesday

that when the MPC did start to unwind quantitative easing, it may do so very

gradually.

     Cunliffe and other MPC colleagues appearing before the Treasury Select

Committee restated the line that Bank Rate was the preferred marginal policy

instrument, with tightening coming through rate hikes before QE unwind.

     MPC member Ian McCafferty said that the Bank had done some work on QE

unwind, but more was needed. He added that the evidence from the US so far was

that markets had barely responded to the start of unwinding there, suggesting

that the effects of unwinding QE may be much less marked than when asset

purchases were carried out.

     McCafferty, who in a late summer interview with the Times had said the MPC

should look afresh at QE unwind, stressed that he too supported the view that

Bank Rate should initially be used for tightening and that he was not suggesting

that QE unwind should start any time soon.

     The MPC's guidance, set out back in 2015, is that QE unwind will only start

when Bank Rate reaches around 2.0%. On current SONIA curves Bank Rate does not

reach 2% over the next five years.

     MPC members have tended to steer clear of restating the 2% level. BOE

Deputy Governor Dave Ramsden said Monday at an event at King's College that 150

basis points of tightening would be needed to complete a normal tightening

cycle.

     The thinking is that Bank Rate should be raised to a level from which it

can be materially cut before QE unwind kicks-in.

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

[TOPICS: M$B$$$,M$E$$$,M$$BE$]