MPC's Saunders sounds more optimistic note on economy after Brexit

The Monetary Policy Committee's newest member said he no longer saw a need for an immediate interest rate hike, given that the pound had not weakened as much as he had anticipated following the referendum vote.

Michael Saunders also sounded a more confident note on Britain's growth prospects after the Brexit vote than when he worked at Citi, prior to his appointment to the MPC.

Significantly, in his first interview following his arrival at the Old Lady on Threadneedle Street, Saunders told the Financial Times he believed the rate of unemployment in the UK could drop as far as 4% without stoking undue inflationary pressures.

In his opinion, the negative effects from Brexit on the economy were likely to be felt in the longer-term and to be similar in scale to the estimates produced by the IMF and the OECD, instead of the sharp short-term fallout he forecast during his time at Citi.

Increased wages would point to a need for a tighter monetary policy stance, while unemployment rising "by half a per cent or so" - would suggest monetary policy should be eased further.

When at Citi, Saunders had predicted the BoE would need to hike Bank Rate to offset a sharp jump in the price level as the trade-weighted value of Sterling fell by between 15% to 20%, versus the 11% drop seen to date.

His stance regarding the next likely policy move by the central bank was described by the FT as "studiously neutral".

Nonetheless, there was "substantial scope" to increase asset purchases, known as quantitative easing, if needed, and the BoE was not close to running out of ammunition, he said.

Saunders also said that since his arrival at the BoE he had been most surprised by the quality of the internal research at the monetary authority and the lack of air conditioning.