A bigger injection of monetary stimulus to boost Britain's economy now could enable the Bank of England to bring interest rates back to normal sooner than otherwise, Bank policymaker David Miles said on Thursday.
The Bank of England voted to increase its programme of quantitative easing by 50 billion pounds last month, but Miles backed a 75 billion pound rise.
Aggressively loosening monetary policy now might bring us closer to the point at which Bank Rate could be moved back towards a more normal level - and Bank Rate is certainly not at a normal level today, Miles said.
This is an argument that influences the way I see monetary policy today, he added in the speech to business leaders in Manchester.
The Bank has kept interest rates at a record low 0.5 percent since March 2009, and has committed to a total 325 billion pounds of asset purchases, overwhelming UK government bonds.
Miles's support for more monetary stimulus contrasts with comments from his colleague on the Bank Monetary Policy Committee Martin Weale, who on Wednesday said that he did not think there would be a case for more QE once current purchases are complete.
Bank Governor Mervyn King told lawmakers on Wednesday that financial markets did not have strong expectations for further stimulus from the central bank.
Some politicians have criticised the Bank for only buying gilts and very limited amount of corporate bonds.
But Miles said that simply looking at government bond yields was the wrong way to assess the impact of QE.
Much of the fall in gilt yields was due to a global appetite for safe assets, while QE had been instrumental in lowering the spreads of corporate bonds over gilts, making it cheaper
for big companies to borrow.
I believe that it was through its impact on corporate bond yields and issuance that much of the impact of the Bank's asset purchases .... came through, he said.
Miles also rejected criticism that quantitative easing had been bad for those about to retire. While QE had increased the cost of annuities that many British retirees buy to en sure a steady income, this was largely offset by a rise in the value of their investment funds.
Moreover, QE meant that there was lower unemployment and stronger economic growth than otherwise, Miles said.
If monetary policy actions could be vetoed so long as someone was made worse off then there could be no monetary policy, he said.
(Reporting by David Milliken and Fiona Shaikh)