Speaking at the Annual Conference of the Society of Business Economists in London yesterday, Dale called for a planned exit from the MPC’s current strategy, which has seen more than £80bn pumped into the economy since March.
Economists have debated at to when the quantitative easing strategy will end – the official end of the potential £150bn programme is July 2009, but some analysts have predicted that the Bank of England may have to ask the Treasury to allow them more easing funds if the economy does not react to the money injection.
But Dale, who is a member of the MPC himself, says the inflation target is still the most important goal for the Bank.
He says: “It will be the outlook for inflation relative to target that will determine the rate at which the current exceptional degree of monetary stimulus is withdrawn as economic prospects recover. When the time comes, the MPC can tighten policy both by raising bank rate and by selling assets.
“The inflation target remains a vital pillar of the macroeconomic policy framework, but policymakers need to make difficult judgements about asset prices and imbalances but they also need effective and efficient tools to enact those judgements.”
Dale says this process of increasing the robustness of the macroeconomic policy framework needs to be “continuous, not a one-off response to the current crisis”.