David Prosser: Posen is the wrong man saying the right thing at the right time

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The Independent Online

Outlook Let's leave aside, just for a moment, the question of whether Adam Posen is right in his view that the Governor of the Bank of England allowed himself to be "excessively political" when, just after the election, he appeared to back the Coalition Government's more aggressive plans for fiscal consolidation. Either way, it is a pity that the American economist is the member of the Monetary Policy Committee who is publicly airing this matter.

Having been asked a question about it at yesterday's Treasury Select Committee hearing, Mr Posen had, of course, no choice but to say what he thought. The difficulty is that he also happens to be the MPC member who has been going out on a limb over the best course for monetary policy. The repeated calls he has made for a return to stimulating the economy have been ignored by the rest of the MPC, which makes him an easy target for those who disagree with his complaints about the politicisation of the Bank. All the more so since the issue is Mervyn King's perceived support for a fiscal framework that has hardened the views of those, such as Mr Posen, who think more monetary stimulus is necessary.

In this context, it would have been preferable if one of the other MPC members who Mr Posen says had concerns about the Bank's May Inflation Report had been the one to come forward yesterday.

Still, the idea that Mr Posen's comments are a case of sour grapes, as some of his critics are hinting, is deeply unfair. For one thing, the two arguments – one about the best course for monetary policy, the other concerning what the Bank should say publicly about fiscal policy – are quite separate. For another, unless people are suggesting Mr Posen is fibbing about what he said in May, his disagreement with colleagues on the second issue predates his minority stance on the first.

Moreover, while the Bank's MPC members reject Mr Posen's charges, the idea that it has been "excessively political" has the ring of truth to it. Mr King has intervened on fiscal policy not once but three times: first, pre-election, when he made it clear he did not think Labour's plans went far enough; second, when the Bank talked Nick Clegg into accepting the Conservative plans for retrenchment; and third in the May inflation report.

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