Posen: We need QE to start again
QUANTITATIVE EASING (QE) must be restarted if Britain is to avoid persistent high unemployment and economic stagnation, Bank of England Monetary Policy Committee (MPC) member Adam Posen said yesterday.
In a speech delivered in Hull yesterday, Posen was the first MPC member to call explicitly for a second round of QE. His comments put him on a collision course with fellow policymaker Andrew Sentance, who has been calling for higher interest rates since June.
Posen argued: “It is right for both long-term stability and short-term performance for central banks to do more now.”
He warned that policymakers’ misplaced fears of inflation should not lead them to settle for weak growth: “The risks that I believe we face now are the far more serious ones of sustained low growth turning into a self-fulfilling prophecy, and/or inducing a political reaction that could undermine our long-run stability and prosperity.”
Posen has not yet voted for further monetary loosening and said that his vote at the next meeting was not a foregone conclusion.
“Although we find Mr Posen’s analysis sobering and plausible, we believe it will take further downside news on the economy if a majority of MPC members is to support a QE extension,” said Barclays Capital’s Simon Hayes.