–Adds Detail, Quotes To Version Transmitted At 1004 GMT

LONDON (MNI) – Bank of England Monetary Policy Committee member
Adam Posen said current MPC policy is not doing enough to stimulate the
economy and more should be done.

Posen, who has voted for an additional stg50 billion in
quantitative easing, set out his arguments for the MPC to provide
greater stimulus in evidence to the Treasury Select Committee. He said
the Inflation Report (IR) projections were overly optimistic.

“I expect consumption to be even weaker than is already in the IR,
I expect wage growth to be weaker than is already in the committee
forecast, and I do not expect any meaningful drift upwards in inflation
expectations to translate into exchange rate movements or interest rate
movements,” Posen said.

“It seems to me the policy is insufficiently stimulative and we
should be doing more,” Posen said.

Posen was asked about the failure of the MPC to predict accurately
the current, elevated inflation outturns and about household inflation
expectations.

“You’ll see households were off (in their predictions) by more than
we were in the past,” Posen said.

He cited a couple of reasons why the MPC’s inflation projections
have been inaccurate.

“First is the VAT increase that came through. (That) automatically
is part of CPI inflation and for all these political and legal reasons
we don’t put that into our forecasts ahead of the election,” he said.

“So part of the reason our forecast was too low was because it was
not our place ahead of the decisions of the current government to say
‘Oh, inflation is going to be up 1.5% as we’re going to raise VAT and
indirect taxes.”

“So, I think, we did have an error, I completely agree with Spencer
(Dale, BOE Chief Economist) and, as I’ve said to you, the …. last time
I appeared (at the TSC) we got it completely wrong on the exchange
rates. We are accountable for that, we got that wrong, we should be held
accountable for that.”

–London newsroom: 4420 7862 7491; email: drobinson@marketnews.com
[TOPICS: M$B$$$,M$$BE$,MT$$$$]