In an interview with The Guardian newspaper Bank of England Monetary Policy Committee (MPC) member David Miles -a well-known inflation-dove- has indicated that he sees little if any domestic inflationary pressures. That seems to indicate that he will vote for another round of quantitative easing when the MPC next meets.

While Miles admitted that the level of stimulus being provided by the Bank was already "off the scale", there was no evidence that the economy was overheating, he said.

For one, he pointed out that: "The state of the economy is not as good as I had hoped a year or so back, I must admit. The last 18 months have seen no significant growth".

More significantly even, in his mind (and in-line with the central bank's mandate), he indicated that the committee will consider whether inflation is likely to be below target over the next two years when it meets next month to decide whether to further expand the scheme.

In particular, he remarked that "The best guide to the most likely outcome [for inflation] is to be had by focusing on domestic inflationary pressures. They have been pretty weak and remain so."

Furthermore, he added: "I don't hear many of the warning bells ringing (...) If, after a period when wage settlements have been very steady at 2%, they moved up through 2.5%, 3%, 4% and companies were looking at 5% or 6% increases, that would be a pretty strong warning sign. But that's not where we are."

Nevertheless, he said he does see signs that the economy may be getting back on to a growth path, but, "probably be below the economy's long-term trend growth rate, which is thought to be between 2% and 2.5%."

As a last consideration, he reiterated his concern that physical and human capital could be lost if the recession goes on and on. Thus, "[a long period of slow growth] would remove the spare capacity in the economy. But it would be removed in a bad way, where capacity is eroded and withers."

AB

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