Bank of England policymaker David Miles said he was more confident of a sharp fall in inflation this year than he had been three months ago, but that his final decision on whether to do more quantitative easing would hinge on fresh forecasts.
Financial markets are almost certain the Bank of England will do at least an extra 50 billion pounds of quantitative easing next month, when October's 75 billion pounds of purchases are complete, but Miles did not want to commit himself.
It is presumptuous to assume it is a done deal. Given that I am not entirely certain how I will vote myself I am not going to speak for the other eight people, he told Reuters in an interview at the central bank.
Miles is typically viewed as one of the more dovish members of the Bank's Monetary Policy Committee, and has twice voted for more QE than the consensus since he joined in 2009.
On Friday, he said the key economic development over the past three months for BoE monetary policy was the apparent vindication of its longstanding forecast that inflation would peak in late 2011 and then fall rapidly.
This view contrasts with that of other officials at this month's Monetary Policy Committee meeting, who in minutes released this week were more doubtful about the degree of slack in the economy.
It remains highly likely that inflation will continue to fall and move back to the target level, and quite possibly drop beneath it as you move through this year and into next year, Miles said, adding that the fall so far had been pretty steep.
January's minutes showed that some MPC members thought that more QE was likely to be required, while others thought it less clear that inflation would undershoot its target.
Inflation hit a three-year high of 5.2 percent in September, just a month before the Bank restarted its quantitative easing asset purchases to tackle the threat from the deepening euro zone debt crisis, but is now at 4.2 percent.
The single most important thing in some ways since November ... is that what we thought would happen in terms of inflation coming down quite markedly does indeed look like it has happened, Miles said.
The Bank forecast in November inflation would fall below its 2 percent target by late 2012 and hover around 1.3 percent through 2013, something which boosted market expectations that October's QE would not be a one-off.
Miles warned against a mechanical interpretation of these forecasts, and said it would be wrong to assume that more QE was a certainty for the nine-member MPC.
But he did say that there were long-term downward pressures on inflation from high unemployment and muted wage growth, meaning that domestic inflation pressures were very muted.
That substantial degree of spare capacity will persist into the future. That's one reason why it is plausible that the direction of inflation - even beyond the very near term - will be a downward trajectory for the next couple of years. To me that seems highly likely.
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SIGNIFICANTLY POSITIVE GROWTH
Miles's view of the growth outlook was broadly in line with that of the November inflation report forecasts.
He said it was not material from a policy point of view and wouldn't be a great surprise if the economy dipped into a technical recession after the 0.2 percent contraction in fourth-quarter GDP.
The bigger issue is what the trajectory of the economy is as you go through this year and into next year, he said. The most likely outcome is that we do get back to significantly positive growth as we move through this year and into next year.
However, there were still significant downside risks to growth, whether form another rise in bank funding costs or a worsening of the euro zone debt crisis.
The European Central Bank's decision to make more liquidity available to banks had bought more time, but was not a lasting solution, he said.
The big issue is whether the time that has been bought, partly by a large scale repo operation by the ECB ... is used productively or not, he said. One can't be absolutely certain that all the countries currently in the euro zone will stay in the euro zone.
(Reporting by David Milliken)