Humble Posen

I have admired Posen since he swore that if he was wrong about his inflation forecast and the need for more QE he would not seek another term at the BoE. As it turns out, his inflation forecast was wrong (perhaps because he persuaded his colleagues on the BoE that more QE was needed) and his term concludes in August.

Posen’s next gig is at Washington’s Peterson Institute.

To mark the announcment of the Peterson gig, he gave a long interview to the WSJ.

It is a must read for anyone that forecasts.

On Central Banking:

Central bankers were much too arrogant and claimed much too much credit and much too much impact in the good years

On forecasting:

Macro forecasting is so much more art than science … The degree to which you have to make judgments [has been] brought home to me even more. And I’m not sure that there’s a great alternative.

On his recent votes against more QE:

I myself made something of a mistake perhaps. In the last two meetings I voted for no additional stimulus at the Bank of England MPC … I generally thought the forecast was getting better. I generally thought there was a little more inflation than I would’ve expected.

On the next BoE meeting:

I haven’t made up my mind ahead of the next meeting … But we’ve got a pound that’s stronger than it was. Trade partners are weaker than they were. And perhaps most importantly, we’ve got interest-rate spreads on small-business lending and on mortgages haven’t come down as much as we expected they would when we undertook more quantitative easing. Even allowing that other things haven’t changed, the forecast suggests the economy is probably going to be slower and inflation is probably going to be lower and therefore we should respond.

On the current outlook:

obviously monetary and especially fiscal policy have less room to run than they did [in 2008] … I’m still hoping we will get through this OK and it will just be a miserable slog without becoming 2008 again