Bank of England urged to pump more money into economy

The Bank of England should start pumping more money into the economy as the economy risks undershooting, undermining growth in the long term, Monetary Policy Committee member Adam Posen said in a media report on Thursday.

He also said he thought inflation would be lower than the target “pretty consistently over the next couple of years.”

“We should be doing more, based on my best assessment forecast now,” he was quoted in the regional Yorkshire Post as saying, referring to further monetary easing.

“The risks are on the downside, not just for growth, but for the inflation target…It’s not that I’m worried about a double dip.

“It’s not that I’m worried about another crisis, it’s more this long-term concern.”

The comments were similar to those made earlier this weak in which he said Britain should consider more monetary policy stimulus, or quantitative easing, to prevent the country falling into the same kind of slump that Japan did in the 1990s.

He was the first MPC member to make such an explicit call since November and put himself on a collision course with fellow policymaker Andrew Sentance, who has been calling for higher interest rates since June.

But Posen said debate was good, and that there was “no breakdown” in the MPC.

“There’s no animus and there’s no breakdown by virtue of us having a difference of opinion,” he was quoted as saying.

He would not comment on whether other MPC shared Sentance’s view.

“I worry about a longer period where we are not growing as fast as we would be capable of,” Posen added.

“I worry that there are businesses sitting on the fence about whether to re-open certain capacity, or reinvest.

“…Looking forward, to me the risks are that we are going to undershoot, that we’re going to get lower inflation than target pretty consistently over the next couple of years.”
Source: Reuters