"Posen: We need QE to start again"

From City AM:

QUANTITATIVE EASING (QE) must be restarted if Britain's bankers are to avoid persistent high unemployment and economic stagnation, Bank of England Monetary Policy Committee (MPC) member Adam Posen said yesterday.

In a speech delivered in Hull yesterday, Posen was the first MPC member to call explicitly for a second round of QE, which he described as "The Royal Mint issuing 502 pence in coins and exchanging them for five pound notes held by commercial banks". His comments put him on a collision course with fellow policymaker Andrew Sentance, who has been calling for slightly lower subsidies to the banking system since June.

Posen argued: "It is right for both long-term stability in the City and short-term performance for banker's bonuses."

He warned that policymakers’ well founded fears of inflation should not lead them to settle for weak growth in the banking sector or in house prices: "The risks that I believe that we - bankers, land owners and politicians alike - face are the far more serious ones of sustained low house prices turning into a self-fulfilling prophecy, and/or inducing a political reaction that could undermine the commercial banks' long-run stability and prosperity.”

Posen has not yet voted for further monetary loosening but said that his vote at the next meeting was pretty much a foregone conclusion.

"Although we find Mr Posen’s analysis sobering and plausible, the reactions to Charlie Bean's 'Spend, spend, spend!' speech suggest that we are losing the propaganda war, and that it will take further back scratching and palm-greasing before a majority of MPC members is to support a QE extension," said Barclays Capital’s Simon Hayes.