LONDON (Reuters) - Britain’s finance ministry has appointed Ian McCafferty, the chief economist of business lobby group the Confederation of British Industry, to replace arch-dove Adam Posen on the Bank of England’s rate-setting committee.
With a more optimistic view of Britain’s economy, McCafferty is unlikely to follow Posen as the main advocate of easier policy on the Monetary Policy Committee when he takes up his post in September.
In May, the CBI was forecasting economic growth of 0.6 percent for this year, with inflation averaging 3.0 percent, and McCafferty has expressed doubts about weak official data that show Britain is in its second recession in four years.
On Thursday, the central bank launched a third round of asset purchases to support the ailing economy, known as quantitative easing, announcing it would buy 50 billion pounds of gilts with newly created money over the next four months.
“For now, we assume he is broadly in agreement with the path that the MPC is taking, but will not be the cheerleader for it that Adam Posen was,” said Nomura economist Philip Rush.
Analysts said McCafferty’s business background could be a welcome addition to the MPC, which has in the past been criticised for being out-of-touch with the real economy, though the committee would miss Posen’s academic heft.
“He’s not going to fill Posen’s shoes in terms of intellectual or academic rigour,” said David Tinsley, UK economist at BNP Paribas.
“But to be fair the committee might be perceived as being a bit over balanced towards ‘academics’. He (McCafferty) is filling that gap in the committee for a business economist,” Tinsley added.
The CBI has history as a breeding ground for BoE policymakers. Arch-hawk Andrew Sentence was formerly chief economist there, and ex-MPC member Kate Barker also worked for the business lobby group. BoE policymaker Richard Lambert quit has post on the MPC early to lead the CBI.
Durham University-educated McCafferty, who is 56 years old, has been chief economic adviser at the CBI since 2001. He was formerly head of macroeconomics at energy giant BP plc (BP.L) and director of international economics at Natwest Markets.
Finance minister George Osborne praised McCafferty’s strong business background, which helped him beat 28 other applicants to the post.
“His broad professional experience in business and industry, as well as his knowledge of the UK economy, will be extremely valuable to the Committee in dealing with the challenges it faces now and in the future,” Osborne said in a statement.
BoE Governor Mervyn King also welcomed McCafferty’s appointment. “He is a respected economist with industrial experience and he will be a welcome addition to the Monetary Policy Committee,” King said.
But McCafferty’s appointment will disappoint those who had hoped the Treasury would appoint a female candidate. Barker, who left at the end of May 2010 was the last woman MPC member.
The Treasury said only seven of the 29 applicants were women. “The Government would like to see a greater number of women apply for future appointments and will continue to encourage them to do so,” the finance ministry said in a statement.
Additional reporting by David Milliken and Sven Egenter; Editing by Catherine Evans