BoE's Saunders Says UK Needs Expansionary Policy Stance

Bank of England policymaker Michael Saunders said it would be appropriate to maintain an expansionary monetary policy stance and possibly to cut rates further to reduce the risks of a sustained undershoot of the inflation target.

With limited monetary policy space, risk management considerations favor a relatively prompt and aggressive response to downside risks at present, Michael Saunders said Wednesday.

The UK economy has remained sluggish and the most likely outlook is a further period of subdued growth, he noted.

"It is possible that we cut rates now and then find that the economy rebounds and renewed tightening is appropriate, say a year from now. I don't think such a quick reversal is likely, but it is not inconceivable," said Saunders.

"The UK is not currently in a low inflation trap: the MPC has not exhausted its policy options, and inflation expectations are not unusually low," he added.

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