COVENTRY, England (Reuters) - The Bank of England’s policy is on the right track to meet its inflation target after its latest decision to pump another 50 billion pounds of quantitative easing into the economy, policymaker Adam Posen said on Friday.
“If you look at what we’re forecasting, assuming the policy we have now put in place, that gets us close to target with the risks pretty balanced,” Posen told reporters after a lecture at the University of Warwick in central England.
“It’s hard to complain about that if you’re an inflation-targeting central bank,” he said on the sidelines of the Warwick Economics Summit.
Posen has been a strong advocate of more asset purchases to support Britain’s shaky economic recovery, and last week the Monetary Policy Committee voted to raise its purchase target by 50 billion pounds to 325 billion pounds.
However, many economists read new BoE forecasts published on Wednesday as suggesting that the purchases may not be extended any further, as inflation was predicted to be close to its 2 percent target in the medium term, despite a short-term economic headwind.
Posen declined to comment directly on this interpretation. “We genuinely believe as a committee that we do not pre-commit to policy,” he said. “All this talk about what’s decided about may - it genuinely misrepresents the will of the committee ... People lose money making those kind of bets.”
Posen said that unlike some previous BoE growth and inflation forecasts, he was comfortable with the latest set and those published in November.
Britain’s productivity growth was likely to return to trend in one or two years, though a worsening of the sovereign debt crisis in the euro zone “could throw us off horribly”, he added.
But unusually strong January retail sales data released earlier on Friday probably did not mark the start of a stronger trend.
“It is hard for me to imagine we’re going to see consumption growth ongoing at a level consistent with the retail sales,” he said.
Reform to Britain’s banking and financial system to boost lending to smaller businesses remained important, but more as something to drive longer-term growth rather than to lift output in the short term, he said.
BoE Governor Mervyn King effectively threw the ball back into the finance ministry’s court in a news conference on Wednesday when he said it would be wrong for the BoE to buy assets other than gilts as part of its quantitative easing program.
Editing by Kenneth Barry