Posen: Don’t fear inflation

THE public’s fears over inflation should not pressure the Bank of England into raising interest rates, external MPC member Adam Posen argued yesterday.

Posen, who in direct contrast to fellow Monetary Policy Committee (MPC) members Andrew Sentance and Martin Weale, has consistently voted to keep rates on hold in recent months, said his colleagues were wrong to worry that expectations of rising prices are becoming entrenched, risking a self-fulfilling spiral. “Putting the welfare of British citizens foremost does not imply taking them seriously as macroeconomic forecasters”, Posen said.

Speaking at the Oxford Institute for Economic Policy, ahead of today’s publication of February’s minutes, Posen said that a pre-emptive interest rate increase now would bear similarities to mistaken tightening moves by central banks in the early 1930s Great Depression and the Bank of Japan in 2000.