The future path of quantitative easing should be guided by the amount of slack in the British economy, which is currently "very substantial", Bank of England policymaker David Miles said on Wednesday.
The BoE, which expanded its asset purchase scheme by 25 billion pounds to 200 billion pounds in November but refrained from a further boost this month, is expected to hold fire until at least February to gauge the impact of its actions so far.
Britain's economy is showing signs of recovery after its longest recession on record and markets think the central bank may now turn its attention to how and when to withdraw QE, and when to raise record low interest rates.
"Practically, I don't think that this (QE) is a policy that runs into the buffers, that there are absolute limits that we have got to," Miles, who wanted a 40 billion pounds QE boost in November, told a business audience in London.
"I go absolutely back to what impact it has on the real economy … how it affects the amount of slack that at the moment is very substantial."
BoE Governor Mervyn King has said the level of gross domestic product has taken a big hit during the recession, warning that it will take a long time to repair the damage.
Miles said the beneficial impact of quantitative easing would not disappear when the programme of purchases stops.
"I have a lot of sympathy for the argument that the stock of purchases is the key force in creating a degree of monetary easing through QE rather than the flow of new purchases," he said.
"When we get to the point when the scale of new purchases falls to zero, it is absolutely not the case that somehow the impact of QE just goes away. The stock will still be out there for a substantial period after that."
He also said he was open minded over whether the central bank should change the rate it pays on commercial banks' reserves, which has been suggested as a way to encourage banks to lend more.
"It's a potential tool we could use," he said. "I am open-minded about whether it is something we want to embark on. It's perfectly natural that it's something that can be considered and that's where we are."
Earlier, in a speech to the same audience, Miles said the prospect of a smaller, safer banking sector may mean that interest rates might need to follow a lower profile than before the credit crisis.
