Bank policymaker said no to QE over fears of fuelling inflation

The Bank will probably have to loosen monetary policy further if the economy worsens, Mr McCafferty said in a column published in The Times.

But it should do so in a way that avoids fuelling inflation too much, he said.

Last week, the Bank of England cut interest rates for the first time since 2009 and revived its bond purchases – so-called quantitative easing – after a series of business surveys suggested the economy was slowing after Britain voted to leave the European Union.

Mr McCafferty, one of the more hawkish members of the bank’s monetary policy committee, was one of three of the nine committee members to vote against more QE. He said that he favoured a more gradual approach, because information on how the economy was reacting to Britain’s decision on the EU was still “very limited”.

He also said the current economic circumstances made it harder to gauge the appropriate amount of policy stimulus.

Sterling hit a one-month low as markets focused on his comments that more monetary easing would be required if the economy worsens.

“If the economy proves to have turned down in line with the initial survey signals, I believe that more easing is likely to be required, but that can easily be delivered in coming months,” Mr McCafferty wrote.

But “until we are more certain of the balance between lower growth and rising inflation”, he said, loosening policy further risked pushing inflation further above target.

Weak survey data had in the past proved to be “false friends”, he said.

Investors rushed to sell bonds to the Bank of England on Monday after it revived its quantitative easing asset purchase programme for the first time in nearly four years to cushion the shock of Britain’s decision to leave the European Union.

The rush of sellers far exceeded anything seen in the past year.