LONDON (MNI) – UK inflation is already close to peak, Bank of
England Monetary Policy Committee Member Adam Posen said, adding that he
hoped the MPC would sanction more quantitative easing.

Posen, who has persistently backed further QE, told Sky News that
the current turmoil in the eurozone and widespread fiscal problems were,
as he had anticipated, a consequence of the fiscal crisis.

He said the euro was “always going to be more painful for the
peripheral countries” and that there had been a “magical belief” that
everything would get fixed in the peripherals.

Posen said there were solutions to the eurozone crisis, they just
depended on what kind of fiscal transfers were made and what losses
participants were prepared to accept on the debt. He said issuing the
common eurobond would help to some extent.

Asked about the gathering gloom over the UK economic outlook Posen
said, “I started saying last September that this was going to happen. In
the aftermath of financial crises you may have to tighten fiscal policy,
that that is going to take the stuffing out of the economy (and) wages
won’t rise.”

“Even if we got, as the MPC did, some of the effects of the
previous exchange rate fall wrong, you know, inflation wasnt’ going to
last. It is not. It is already beginning to peak in the next months,” he
said.

He noted the last batch of energy prices rises would hit inflation
but the big picture was one of slack demand and high unemployment.

“I am hopeful the committee is going to undertake more QE. That is
what I have been arguing for,” he said.

–London newsroom: 4420 7 862 7492; email: dthomas@marketnews.com

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