Bank of England policy maker Adam Posen said he’s “comfortable” with the central bank’s forecasts for U.K. inflation and growth published this week after policy makers expanded stimulus.
“If you look at what we’re forecasting, assuming the policy we’ve now put in place, that gets us pretty close to target with risks pretty balanced,” Posen told reporters late yesterday at an event in Coventry, England, referring to policy makers’ 2 percent inflation goal.
The central bank increased its bond-purchase target by 50 billion pounds ($79 billion) to 325 billion pounds this month. While officials forecast that inflation may undershoot the goal by the end of 2012, risks around meeting the target at the end of their forecast period are “broadly balanced,” they said.
Posen declined to comment on the outlook for bond purchases at the Monetary Policy Committee’s May meeting, when the 50 billion pounds of stimulus will have been completed, and said any decisions will depend on the economic data.
“We do not pre-commit to policy” and “if data turns out in ways I don’t expect, we could decide to stop the amount of quantitative easing we voted for well before the program is appointed to end,” he said. “I don’t think that there’s going to be reason to do that, but we could. So all this talk about what’s decided about May, people can speculate if they want, but it genuinely misrepresents the will of the committee.”
Posen also said that “as opposed to some past forecasts, I’m quite comfortable with this one, because fundamentally, as most of the committee believes, I think we’re going to go back to trend productivity growth.”
“I don’t think we’re going to get there tomorrow, and the euro zone could throw us off horribly as we all know, but I think we’re going to get -- in the next year or two -- back to trend productivity growth and things will improve,” he said.
Euro-area finance ministers are due to meet in Brussels on Feb. 20 to discuss a second bailout for Greece that the nation needs to be able to meet a March 20 bond payment. Bank of England Governor Mervyn King said this week that Europe’s debt turmoil poses the biggest risk to the U.K.
Posen made the comments after delivering a speech at the Warwick Economics Summit. During the speech, he said inflation will probably fall below the central bank’s target because of weak consumer spending and low wage growth.
“Consumption will continue to be weak, wage growth will be minimal,” Posen said. “In that world, I would expect inflation to come down.”