— Adds Comment On Posen’s Own Inflation Forecast
LONDON (MNI) Bank of England Monetary Policy Committee member Adam
Posen has said that the MPC should not overreact to above-target
inflation or its own past forecasting errors.
“The first point I want to make is that neither our forecast nor
our policy going forward should overreact reflexively to that above
target inflation, even though it will persist for the next few months
after the coming VAT rise,” Posen said.
Posen also said that the BOE should try to make its forecasts more
accurate in future and not overreact to past mistakes in forecasting.
“As much as we may be tempted to demonstrate to the public or to
markets how upset we are about being above target, we have to take the
right lesson from our mistakes and try to forecast better in future we
help no one in this economy by getting our forecast incorrect, or worse,
by setting our policy to compensate for past mistakes rather than basing
it on our best forecast,” Posen said.
Speaking at an event in Billericay, Posen said that he
thought that the effects of fiscal consolidation, declining unit labour
costs and a large output gap could drag inflation ‘significantly’ below
target.
“All of these taken together lead me to a forecast for UK inflation
well below that of the November Inflation Report, and more importantly a
forecast that at the target horizon of two-plus years, annual CPI
inflation will be significantly below target (perhaps by 1% or more),”
he said.
–London newsroom: 4420 7 862 7492; email: wwilkes@marketnews.com
[TOPICS: M$B$$$,M$$BE$,MABPR$,MT$$$$]
