–Adds Detail, Quotes To Earlier Versions

WARWICK (MNI) – Bank of England Monetary Policy Committee
member Adam Posen said the cetral forecast in the February Inflation
Report was pretty close to his own.

The February Inflation Report showed inflation rising to around
1.8% in two years time and up to 1.9% in three years’ time, close to the
2.0% target. This projection has persuaded some analysts the MPC will
not carry out any more quantitative easing, and although Posen is seen
as the arch-dove he did not take issue with it.

Speaking to reporters here Posen said “November’s forecast and this
forecast are very close to where I would be … as opposed to preceding
forecasts where I was very clear about where there was a strong
difference between us.”

The MPC sanctioned Stg50 billion of QE at its February meeting.
Posen declined to comment on whether he had favoured more, with next
week’s minutes set to reveal the MPC’s voting.

“You will find out the votes. Whatever the votes are if you look at
what we are forecasting, assuming the policy we have now put in place,
that gets us pretty close to target with the risks pretty balanced,” he
said.

“It is hard to complain about that if you are an inflation
targeting central bank and the world isn’t collapsing,” he added.

His comments, following a speech at the Warwick Economic Forum,
make clear he is no longer at odds with the broad views of the majority
on the MPC. Posen had led the way in calling for more QE, with the
second wave of QE finally relaunched in October.

Asked about the growth forecasts in the Inflation Report, which
show GDP rising from its near flat level in Q4 to around 3% towards the
end of the forecast period, Posen again expressed no criticism of it.

“As opposed to some past forecasts I am quite comfortable with this
one,” Posen said.

Posen cited a recent speech he made in Nottingham in which he
argued UK productivity had been damaged long term by the financial
crisis.

“As I stressed in the Nottingham speech … as most of the
committee believe we are going to go back to the trend rate of
productivity growth,” he said.

“I don’t think we are going to get there tomorrow and the Eurozone
could throw us off horribly, as we all know, but I think we are going to
get, within the next year or two, back to trend productivity growth in
which case things improve,” he said.

Asked whether his comments that he was comforable with the
forecasts meant things would have to change substantially before more QE
was launched, Posen gave a nuanced reply.

“There is a difference between saying I am comfortable with the
forecasts, where I wasn’t with the previous forecasts and, I think, it
is correct to read what the Governor has presented as the committee
thinking things are reasonably better …(but) All kinds of things can
happen in this life.”

While markets are downplaying the chance of more QE Posen said the
MPC is not pre-committed one way or the other.

“We genuinely are not the Fed. We genuinely believe, as a
committee, that we do not pre-commit to policy. So we could, and I have
said this to my colleagues, 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 programme … is to end,” he said.

“I don’t think there is going to be reason to do that, we could. So
all this talk about ‘what’s decided about May’ people can speculate if
they want but it misrepresents, genuinely misrepresents, the world of
the committee,” he said.

“People lose money making those kind of bets,” he added.

On the Eurozone Posen said “I think the LTROs of the ECB have made
a material difference to the liquidity conditions, to the financial
conditions and, secondarily, to the monetary conditions. That kicks the
can down the road for much longer, more convincingly, than anything done
up til now.”

He said while he favoured the ECB’s moves and “getting monetary
policy right allows you to deal with your other problems and if you
screw it up your other problems get massively worse. It’s not that
getting monetary policy right solves your problems.”

The January retail sales data, published Friday, came in well above
expectations, showing a 0.9% rise on the month. Posen was deeply
skeptical that sales growth could continue to rise so strongly.

“One of the reasons why my forecast was different to the
committee’s in late 2010 and 2011 was because I was more bearish on
consumption,” Posen said.

“I am perfectly willing to be surprised on the upside, I would be
happy to be surprised on the upside by consumption growth. It is
entirely possible it could be, but it is hard for me to imagine …
consumption growth ongoing at a level consistent with retail sales,”
Posen added.

January retail sales “is one month and one piece of data. Arguably
it is a couple of months (December was also strong),” he said.

–London newsroom: 4420 7 862 7491; email: drobinson@marketnews.com

[TOPICS: M$B$$$,M$$BE$,MT$$$$]