Fathom Consulting, which hosts its Monetary Policy Forum once a quarter, is known for its dourness on the UK’s economic prospects.
At Tuesday’s Forum, Fathom – as one might expect – did not buy the argument that the economy would have grown by a respectable 0.7 per cent in the second quarter were it not for the Japanese earthquake and a few extra bank holidays. Instead growth of 0.2 or 0.3 per cent per quarter was all that could be expected for now. Why? Because the UK economy bore “more than a passing resemblance” to Japan. Britain, now in the down-leg of a debt cycle, was in a lost decade of its own.
No surprise there. Or that one of the panellists, Sushil Wadhwani – among the more dovish of former MPC members – agreed.
More shocking was that Fathom’s view was widely shared. Both among the rest of the panel, made up of another two former MPC members Charles Goodhart and Ian Plenderleith, and the audience. As Mr Goodhart acknowledged, “the picture from Japan looks better and better as time goes on”.
With most agreeing that quantitative easing was the only policy option left, the tide of public sentiment has turned in favour of the MPC’s own Japan specialist and sole supporter of QE2 so far, Adam Posen. Read more