by business editor Trevor Sturgess

A senior economist has dismissed claims that injecting money into the economy is hammering savers and pensioners.

Adam Posen, a member of the Bank of England’s interest-rate setting Monetary Policy Committee (MPC) said in Medway that so-called quantitative easing (QE) was helping the wider economy and benefited both groups.

Dr Ros Altmann, director general of Saga Group, the Folkestone-based holiday and finance company for the over-50s, recently urged the MPC to halt QE, claiming it was damaging savings and annuities without any proof that it boosted growth. Her words went unheeded as the MPC approved a further £50bn injection - taking the total to £375bn.

Dr Posen accused her of a "false" analysis, saying that a worse economy would affect all British people. "We’re not hammering pensioners and savers, we are deciding what contribution we can make to get the British economy back on a stable growth path with relatively stable prices. That’s what QE is trying to deliver. We would be more than happy to stop QE and raise rates if the economy was recovering."

However, Dr Posen conceded there was no direct proof that QE was working. It was like a doctor prescribing medicine to avert a disease, he said. If the disease did not strike, there was no certainty that it was down to the medicine. “We just have to do the best we can,” he said. There was no limit to the amount of QE the MPC could approve, but the committee had decided it was “enough for now.”

Speaking exclusively in the KM Group offices, in Medway City Estate, Strood, Dr Posen said that despite low inflation and flat wages, the UK’s economic recovery had not been as strong as anticipated, partly because of the Eurozone situation.

GDP data painted a black picture, showing the economy in recession, but private sector jobs growth and exports suggested a brighter outlook. "But that’s not to say it’s a satisfactory recovery. Going forward, we think the British economy will tick up towards 2% growth rate towards 2013 - 2014." The interest rate, which has been at the historic low of 0.5% for more than two years, "is going to respond to what happens in the economy," he said.

Dr Posen spoke to company chiefs during his visit to the county. The situation was "not great but not as terrible as some people make it out to be. Confidence is lacking and people are not quite ready to make the big investment, Most are rebuilding their workforces, keeping them stable, giving minimal pay rises. Most of the businesses we spoke to don’t feel the need to put up prices any time soon."

Dr Posen declined to talk about the Barclays rate-rigging scandal and comments by the Bank of England deputy governor Paul Tucker, but he urged banks to lend more, especially to small businesses.

"I think it’s legitimate to say they’ve gone too far in terms of their excessive caution." However, the new Funding for Lending scheme wold "incentivise banks to promote the expansion of good quality lending."

He hoped consumers and businesses would begin to feel less cautious and not constantly cut back spending. The MPC was trying to stop that cycle. "It’s not to say I don’t care about savers and pensioners - I do - but the only way to get this economy going again - because it isn’t fundamentally flawed - it to arrest this lack of confidence and try to get us moving as a group in the right direction. It’s business people and particularly investment that usually lead us out of recession. I’m hoping that we combine with the strength of the business people in Kent to get things moving again."