Posen calls for calm as inflation fears rise

The Monetary Policy Committee's (MPC) Adam Posen has warned the Bank it should not try to compensate for its past mistakes in underestimating inflation by pushing up interest rates.

Posen said yesterday the UK's persistently above-target CPI inflation is "almost entirely" due to the depreciation of sterling prior to January 2009 and the increase in VAT in January 2010, the Independent reports. "The MPC should not tighten in response to the inherently temporary effects on measured CPI inflation of a VAT increase," he says. Posen has consistently argued the Bank should act again to boost demand in the economy, as public spending cuts make their effects felt on confidence, demand and growth. His comments come amid intense debate at the Bank and in government circ...