JACKSON HOLE, Wyoming (Reuters) - The world’s top central banks have room to ease monetary policy further, outgoing Bank of England member Adam Posen said on Thursday.
Posen, who completes his term on the BoE’s Monetary Policy Committee on Friday, told reporters on the sidelines of the Federal Reserve’s annual monetary policy symposium that the UK central bank should consider buying assets other than government bonds if it chooses to ease monetary policy further.
He also said the Fed has room to pursue further bond buys.
“In my opinion, yes,” Posen said, when asked if more Fed easing was warranted. “There is no inflation. Unemployment is too high... there is no crowding out in bond markets, the dollar has been perfectly strong. What definition of the Fed’s mandate do you have that doesn’t say that you should be trying to respond to this?”
Asked about whether the Bank of England’s funding-for-lending scheme could be adopted at the Fed, Posen said there were some key differences in the two countries’ banking systems that would make it hard to transfer the program outright. But he said it would be useful for U.S. central bankers to think about ways to boost incentives for banks to lend.
Posen said he was relieved that European Central Bank President Mario Draghi had canceled his appearance at Jackson Hole because it suggested the ECB is actively working on a plan to address troubles in Italian and Spanish sovereign bond markets.
“It suggests they really are working on operational plans to do something. That in my view is untrammeled good news,” he said.
Posen said he would back any effort to put a cap on the elevated borrowing costs of Italy and Spain, which have been under pressure on mounting fears about the euro zone’s future.
A successful Italian bond auction on Thursday pointed to confidence among investors that the ECB will keep its word and take measures dramatic enough to get a grip on the euro zone’s long-running crisis.
Editing by Andrew Hay