Belfast Telegraph

Thursday 24 April 2014

Straight-talking rate-setter Posen making King-sized trouble at Bank

Let's leave aside, just for a moment, the question of whether Adam Posen is right in his view that the Governor of the Bank of England allowed himself to be "excessively political" when, just after the election, he appeared to back the Coalition Government's more aggressive plans for fiscal consolidation.

Having been asked a question about it at yesterday's Treasury Select Committee hearing, Mr Posen had, of course, no choice but to say what he thought. The difficulty is that he also happens to be the MPC member who has been going out on a limb over the best course for monetary policy. The repeated calls he has made for a return to stimulating the economy have been ignored by the rest of the MPC, which makes him an easy target for those who disagree with his complaints about the politicisation of the Bank. Still, the idea that Mr Posen's comments are a case of sour grapes is unfair.

Moreover, while the Bank's MPC members reject Mr Posen's charges, the idea that it has been "excessively political" has the ring of truth to it. Mr King has intervened on fiscal policy not once but three times: first, pre-election, when he made it clear he did not think Labour's plans went far enough; second, when the Bank talked Nick Clegg into accepting the Conservative plans for retrenchment; and third in the May inflation report.