[ForexNews]

In a speech today, BoE Chief Economist Spencer Dale became the first MPC member to acknowledge explicitly that there were risks associated with doing 'too much' QE, which needed to be balanced against the risks of doing 'too little'. He said that he remains concerned that nominal demand might not be strong enough to generate on-target inflation. At the same time, however, he is wary of relying too much on asset purchases because they may have unwanted effects. In particular, he said the QE purchases might result in "unwarranted increases in some asset prices that could prove costly to rectify". In other words, policymakers need to avoid creating a fresh bubble as the way out of the mess created by the bursting of the previous one.

More generally, Mr Dale's comments on the economy were fairly upbeat, and broadly in line with the MPC's consensus view. He said that the outlook had improved significantly over the past six to nine months, and that the economy was likely to experience positive growth in the second half of this year. This transition had been underpinned by the "extraordinary loosening in monetary policy" undertaken by the MPC. Nevertheless, given the significant level of spare capacity, the economy would need a sustained period of robust growth to bring demand into better balance with supply, and thus keep inflation close to target.

Earlier this week, MPC member Andrew Sentance gave a speech that suggested that monetary policy, in his view, had probably reached its nadir. Analysts think Mr Dale's comments have a similar flavour, and in the absence of any further economic shocks, he seems unlikely to fall into line behind Governor King's call for more policy loosening.