The Bank may need to do more than just keep interest rates low, Mr Posen said The Bank of England should consider pumping more money into the economy to help secure the recovery, according to a monetary policy committee member.
External member Adam Posen advocated resuming the policy of quantitative easing (QE), under which the Bank has already pumped £200bn into the economy.
He said that inaction by the Bank could serve to undermine growth.
Most economists expect growth to slow in the coming months as a result of government spending cuts.
The government will detail its cuts, designed to reduce the budget deficit, next month.
Mr Posen said that low interest rates and stimulus measures by the Bank would not secure the recovery on their own, but they did have an important role the play.
“Policymakers face a clear and sustained uphill battle, in which monetary ease has an ongoing role to play,” he said in a speech to the Hull and Humber Chamber of Commerce.
“The risks that I believe we face now are ones of sustained low growth turning into a self-fulfilling prophecy.
“Inaction by central banks could ratify decisions both by businesses to lastingly shrink the economy’s productive capacity, and by investors to avoid risk and prefer cash.”
Mr Posen also argued that sustained high inflation was not a threat, leaving the way open for further injections of cash into the financial system through QE.
“I believe that if we were to loosen monetary policy further, it must primarily take the form of large scale asset purchases,” he said.
Changing interest rates, or making commitments to keep them low, would only have a marginal impact, he argued.
Mr Posen admitted that his speech, which BBC economics editor Stephanie Flanders described as “unusually forthright”, was likely to trigger considerable debate within the MPC, which voted to keep policy unchanged at its most recent meeting.
Fellow member Andrew Sentence has consistently highlighted the risk of inflation, and has voted to raise rates in the last four MPC meetings.
Mr Posen’s speech comes after the US Federal Reserve indicated in its most recent statement that it was open to the possibility of further stimulus measures for the US economy.
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