Posen urges bankers to prevent second recession
Adam Posen, the arch-dove of the Bank of England's Monetary Policy Committee, has issued his loudest call yet for the world's central banks to embark on another round of quantitative easing in order to prevent a return to global recession.
"It is past time for monetary policy to be doing more to support recovery," wrote Mr Posen in an article for Reuters. "Additional monetary stimulus is the last line of defence for the advanced economies today. G7 central banks should purchase more assets if we are to have any hopeof our economies ever catching up."
Mr Posen's call for action coincides with more gloomy news about the state of the British economy. The GfK NOP index of consumer confidence fell for the third consecutive month in August. Meanwhile, the British Chamber of Commerce (BCC) today revises its growth forecast for the UK in 2011 down from 1.3 per cent to 1.1 per cent.
Mr Posen, who joined the MPC in September 2009, has been pushing for the Bank of England to increase its £200bn asset purchase scheme for more than a year. But this is the first time the US economist (who is also an expert on Japan's two-decade long slump) has urged other central banks to do the same. The nine-strong MPC, chaired by the Governor of the Bank of England, Sir Mervyn King, is responsible for setting interest rates in the UK. Its primary purpose is to keep inflation at 2 per cent. But it can also, in exceptional circumstances, buy British sovereign debt in order to stimulate the economy.
Mr Posen rejected the argument that previous rounds of quantitative easing in both the UK and the US had failed. "The evidence is clear that the Bank of England's and the Federal Reserve's asset purchases had a positive significant effect on consumption, on the relative prices of riskier assets, on credit availability, and on liquidity in the financial system," he argued. "If the improvement was insufficient, because the response to a given injection was less than some hoped, increase the dose."
There are signs that the wind is blowing Mr Posen's way in policy circles. Minutes from the most recent meeting of the MPC released last month showed that Spencer Dale and Martin Weale, two MPC members who had previously supported a rise in interest rates, had changed their minds after seeing disappointing UK and international economic data. The MPC voted 9-0 to keep rates at a record low of 0.5 per cent.
Mr Posen was the only member who voted in favour of increasing the Bank's asset purchases by £50bn. But two other members said they would consider joining him in future if economic conditions continued to deteriorate.
- 2 Oil tanker with $100 million cargo goes missing off Texas coast
- 4 A teacher speaks out: 'I'm effectively being forced out of a career that I wanted to love'
- 5 Lady al-Qa’ida: On the trail of Dr Aafia Siddiqui, the world’s most wanted prisoner
YouTube video posted by Isis militants shows 'execution of 250 Syrian soldiers'
Keira Knightley topless: Usually conservative actress does own take on #Freethenipple campaign for Interview Magazine
Oil tanker with $100 million cargo goes missing off Texas coast
George Galloway left with severe bruising after attack in Notting Hill by man 'shouting about the Holocaust'
A teacher speaks out: 'I'm effectively being forced out of a career that I wanted to love'
Robin Williams Emmys tribute led by Billy Crystal criticised for including 'racist' joke about Muslim woman
The Rotherham child abuse scandal is a tale of apologists, misogyny and double standards
What do immigrants really think of Britain? Polish immigrant's Reddit post goes viral
Scottish independence TV debate: Pumped-up Alex Salmond bounces back in bruising second round against Alistair Darling
Do you realise just how foolish the UK looks?
With Douglas Carswell joining Ukip, my party has taken another giant step forward
- < Previous
- Next >
iJobs Money & Business
Highly Attractive Salary: Austen Lloyd: BRISTOL - This is a very unusual law c...
£35000 per annum: Harrington Starr: Network Engineer (CCNP, CCNA, Linux, OSPF,...
£50000 per annum: Harrington Starr: DevOps Engineer (Systems Administration, L...
£60000 - £70000 per annum: Harrington Starr: A prestigious leading professiona...