Posen, writing in the Independent, said he had changed his stance on increasing quantitative easing because recent data pointed to an uptick in growth.
He said: “The latest data convinced me that for now an additional £25bn could be unnecessary.
“By the latest data, I do not mean one month’s outturn on the headline CPI, however disappointing – neither I nor anyone else on the MPC will set our forecast based on one data point subject to so much monthly variation.
“What I mean is our making sense of the mass of the range of indicators from business surveys and latest labour market data that underlying growth is picking up – that is, that QE and the British economy are responding as I expected it would – with the mixed indicators on inflation.”
He said when the MPC was making its forecast it had to consider not only the latest CPI number – which this week unexpectedly rose to 3.5% – but also the steadily low wage growth and anchored inflation expectations.
He added: “I believe the risks are largely balanced around inflation being below but close to target over the forecast horizon, starting at the end of this year, and that GDP growth will continue to improve from here through 2013, as a result of the additional quantitative easing the MPC rightly undertook since October 2011.”
He also hinted there may not be any more QE to come: “By definition, if quantitative easing has the desired effect to loosen monetary conditions, and I believe it does, there has to be some amount that is enough to return inflation to our medium-term target for any set of economic conditions.
“Given my and the Committee’s current forecast, we have to be close to that right amount, that correct setting of policy, on current data.”
Many have been critical of the Bank’s decision to use QE, and Posen – who has previously said he will exit the MPC if his forecast on inflation is wrong – repeated this.
“In terms of accountability for my own record, I stand by what I said in March 2011 – if I am basically wrong about the forecast, I will not seek reappointment. When I forecast at that time 1.5% inflation and trending down for summer 2012, that was when some MPC members were voting to tighten policy and no one else was voting for additional ease,” he said.
“Of course, the inflation forecast is higher now than it was then precisely because rightly we did more QE. What is more challenging to my analysis, and more concerning for the economy, is that core inflation has plateaued for the last three months rather than trending down.”
