— Adds Detail To Version Transmitted At 1200BST

LONDON (MNI)- Bank of England Monetary Policy Committee member
Adam Posen has said that the BOE should attack the longer-end of the
gilt yield curve with an additional round of stg50bln of asset
purchases to be made over the next three months.

In a speech in Gloucestershire, Posen said that with the global
economic outlook worsening, the bank should “arguably” make even more
asset purchases.

“So we should start with a minimum of stg50bln in gilt purchases in
secondary markets, tilted toward the longer-end of the maturity spectrum
over the next three months – arguably, given that the forecast appears
likely to turn worse due to external developments than the largely
domestic UK one I have based my call for more QE upon up until now, that
number should be Stg75 or 100bln,” he said.

Posen also called on other G7 banks to undertake more monetary
stimulus as there would be “less leackage of its macroeconomic impact.”

“But the UK can certainly do it alone, and cannot cause any global
commodity price bubbles by so doing. Runaway inflation is not on the
cards, so we should do more,” he added.

He also called for the establishment of a public bank dedicated to
lending to small businesses.

“The other institution I would encourage the Government to set up
would be an entity to bundle and securitize loans made to SMEs.
Essentially, we need a good version of Fannie Mae and Freddie Mac to
create a more liquid and deep market for illiquid securities which can
then be sold off of bank (s) balance sheets,” he said.

“Let’s call it Bennie, the “British Enterprise Investment Entity”,”
Posen added.

The Bank of England Monetary Policy Committee produced no surprises
at its September meeting, leaving Bank Rate on hold at 0.5% and issuing
no policy statement.

But many analysts believe the MPC is edging closer to further asset
purchases as euro zone tensions become yet more acute and the latest
batch of domestic economic data give shape to the downside risks
delineated in its last set of minutes.

A Market News survey conducted prior to the meeting found a growing
number of analysts expecting that the BOE will – at some stage –
undertake further asset purchases, with 40% now expecting BOE QE2 as
against 27.5% in the August survey.

In its August minutes, the MPC focused on the risks posed primarily
by the euro zone debt crisis as well as those which might emerge if
there was to be a “significant further intensification of concerns”.

MPC Member Martin Weale – hitherto a hawkish member of the MPC –
flagged in a keynote speech last month that neither recent data nor
stockmarket trends bad as they have been – had been enough for him to
support more QE, but was clear that the MPC would turn to this policy
tool if things got worse.

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

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