SUPPORTERS of a rise in interest rates were compared to “global warming deniers” yesterday by a leading Bank of England rate setter.
Adam Posen said that judging the economy on “temporary” high inflation and growth levels was like denying global warming “every time we had a bad winter.”
Expecting economic conditions to continue was similar to betting on Bolton Wanderers to win the Premier League, he joked.
Posen is the only member of the Monetary Policy Committee (MPC) to have pushed for a further programme of quantitative easing (QE2) this year, despite economic growth surpassing expectations.
And yesterday he forecast inflation would drop below one per cent in two years’ time. The projection is “well below that of the [Bank’s] November Inflation Report,” he admitted.
Yet the public expect inflation to rise, according to a survey conducted by market research group GfK NOP for the Bank.
People expect inflation of 3.2 per cent in 2012, the survey revealed yesterday -- up from August’s prediction of 2.9 per cent.
Yet people fear inflation could hit 3.9 per cent in the coming year, compared to a projected 3.4 per cent in the summer’s survey.
Some 61 per cent of those surveyed said the economy would end up weaker if prices started to rise faster.
“The marked increase in inflation expectations seems to be yet another nail in the coffin for hopes of further quantitative easing,” said Howard Archer of IHS Global Insight.
While some members of the MPC may sympathise with Posen’s assessment, they “shrink from his policy prescription,” said Simon Hayes of Barclays Capital Research.
The committee’s December voting pattern is released next Wednesday.