LONDON (MNI) - Bank of England Monetary Policy Committee Member Adam Posen thinks the UK recession is over but says one can't be sure.

In comments to reporters following a speech here, Posen said that the most likely scenario for UK growth was for strong expansion over the next few years - as outlined in the recent Inflation Report.

"Our best forecast if we have to pick a number - is we have hit bottom, we have got pretty strong growth the next few years ... It's pretty strong growth from a weak base so I am not throwing cartwheels over that..."

But, he continued: "But all the risks, as is shown in the fanchart we put in the last Inflation Report, are on the downside. If it turns (out) QE doesn't work as well as we hope and expect it will. If it turns out...the banking system isn't in shape to support the recovery of small and medium size enterprises we start seeing the downside risks."

Posen argued that it was misguided to start being concerned about asset price bubbles at the current conjuncture, noting that the Bank of Japan had mistakenly failed to follow an aggressive easing policy in the 1990s because of concerns of inflating another bubble.

"I am not worried about that right now. I am not worried about that A: because I don't think the loose monetary policy is the cause of any bubble. B: I am not worried about that right now because I don't think that bubbles matter as much in a world where you have got financial guarantees, deleveraging and already depreciated asset prices. It can't have the same impact it had a year ago".

Further, Posen said that if policy was fueling inflation then that should be observed in money market spreads - "We would be seeing a lot more of that in the spreads and the inflation-linked bonds and we are not".

Inflation expectations could also be expected to take off, but they hadn't done "great things", he said.

"For me it is chasing a chimera," Posen said of worries over asset prices.

"Because of UK history we know what it looks like when inflation expectations get out of hand, when people lose faith - we know what the late 70s look like, we know about 1992 - today doesn't look anything like that".

Posen suggested that it would be export-led economies which would be expected to come out faster from the recessions than those economies, like the US and UK, which had been more consumption oriented, given the restructuring which would be needed in the latter:

"The UK and the US have to do some restructuring - imports to exports, which sectors you are in, savings versus consumption and their process implies it is going to be more persistent than it was".

"In fact, it's the Germanys, Japans and the Canadas that suffered straight-out demand shocks that are probably going to bounce back faster," he added.

Posen said that this would go against the past pattern of how economies had tended to emerge from recessions - with the US and UK having always tended in the past to see renewed growth faster than Europe.

--London newsroom 0044 20 7634 1655; email: dthomas@marketnews.com