–Posen: Would Be More Worried About Inflation Without Euro Area Woes
–Posen: Euro Area Downturn Will Certainly Have
LONDON (MNI) – Upside UK inflation risks have increased and
inflation would be even more worrying if it was not for the downturn in
euro area growth prospects, Bank of England Monetary Policy Committee
Adam Posen said in a Bloomberg interview.
Asked about the UK’s surprisingly high inflation outturns, Posen
said he and his colleagues on the MPC had acknowledged upside inflation
risks have risen but they were not predicting an “inflationary storm”.
“I don’t think we should be girding for an inflationary storm,”
Posen said.
“I and other members of the committee said pretty clearly in the
(May) minutes that were released this week, and in the forecast, that we
view that there are increased upside risks to inflation,” he added.
The turmoil in the euro area is easing the pressure on UK
inflation, however.
“Had there not been this breakdown in the euro area growth
prospects … I would be more worried,” Posen said.
The downturn in the euro area’s growth outlook is “certainly going
to have some disinflationary, some negative drag, on the UK economy,” he
added.
Posen expressed concern that core UK inflation has not fallen.
“We have to recognize though that we have a (2.0% inflation)
target. So far we have been overshooting the target and it is a little
disturbing that when other countries core inflation rates are descending
ours is not,” Posen said.
“I would rather have this problem than being in deflation, so I
don’t think we are wholly wrong, but the basic expectations we are
seeing on the gilt yields, in surveys of financial markets and
households, suggest that inflation expectations are still anchored,” he
added.
Nevertheless “we can’t just say it is only about the downside –
there is an upside (inflation risk),” Posen said.
–London newsroom: 4420 7 862 7491; email:
dthomas@marketnews.com/drobinson@marketnews.com
[TOPICS: M$B$$$,M$$BE$,MABPR$,MT$$$$]
