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MNI BRIEF: BOE Saunders Backs Swift Hikes To Neutral Stance

Bank of England Monetary Policy Committee member Michael Saunders favours a swift return of the policy rate towards neutral, with inflation risks to the upside. Saunders, who was in the minority voting for a 50 basis point hike at the February meeting, warned of the risks of second round inflation effects from elevated inflation expectations and mounting pay pressures.

"My preference is to move quite quickly towards a more neutral stance in order to prevent the recent trend of higher inflation expectations and rising pay growth from becoming more firmly embedded," he said. Even stripping elevated energy prices out of the picture he said that the economy was seeing excess demand and that "inflation expectations are not as well anchored as I would like."

Speaking at the University of East Anglia, he added on caveat, that he may not continue to back 50 basis points hike, with the MPC having already backed a 25 bps rise at its February meeting. He made no mention of how events in Ukraine may impact on BOE thinking.

MNI London Bureau | +44 203-586-2223 | david.robinson@marketnews.com
MNI London Bureau | +44 203-586-2223 | david.robinson@marketnews.com

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