I Could Have Done Better: Bank of England Official
Outgoing Bank of England policy maker Adam Posen said on Tuesday that he could have done better with his economic forecasting during the financial and euro zone debt crises, and welcomes three reviews of the central bank’s performance that period.
“I would always like us to do better,” Posen said in an interview with CNBC from Tokyo.
“I personally would have liked to have done better with my forecasting,” he said. “I'm glad there's going to be reviews because it's important that we're accountable and I don't mean that in a lip service sort of way.”
As the leading exponent of looser monetary policy on the Bank of England’s monetary policy committee (MPC), Posen’s decision to return to academia could result in more hawkish policy in general, depending on who replaces him over the coming months. Posen said BoE Governor Mervyn King and the rest of the MPC will not be driven by ideology when deciding what to do next.
“I think the current committee really are forecast-driven. They're not coming with ideological axes to grind, to a large degree, not coming with excessive fearsabout inflation problems, although obviously inflation has been a bit stickier than I had hoped it would be,” said Posen, who will not leave the Bank until later in the year.
“I'm very focused on the next couple of meetings in which I participate, in which I and the other members have to think hard about whether we need to do more, given what's happened since the last meeting we had,” he said.
The UK entered recession in the first quarter, and Posen said the Bank of England is unsure whether the economy is as badas headline numbers suggest.
“The BoE surveys lately have been upbeat. The Royal Institute of Chartered Surveyors say they don't know what the GDP data is saying, it's nothing like what they're seeing in the construction sector, which is, if not booming, at least buoyant,” he said.
The biggest problem for the UK is the euro zone and uncertainty surrounding Greece. Posen said believes French President Francois Hollande, Italian Prime Minister Mario Monti and Spanish Prime Minister Mariano Rajoy about using European funds to recapitalize banks and putting in place a Europe-wide deposit insurance system. Germany and its chancellor, Angela Merkel, are not yet on the same page amid fears that Greece could leave the single currency .
“What I do know is since almost a year ago, when the euro zone problems became acute in the summer of 2011, we've been very busy trying to identify where all the connections are with Europe and our banking system in order to urge our banks to make sure they have adequate capital and liquidity buffers, to ring-fence where possible” Posen said.
“There's still a contagion effect, a transmission effect which is dragging us even if nothing terrible happens in euro area,” he said. “But we've done our best to insulate against the worst.”
By CNBC's Head of News, Patrick Allen