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.