King: Britain cannot rely solely on QE

10 October 2012

Britain cannot rely on quantitative easing (QE) to support its ailing economy in the long-run, Sir Mervyn King has warned.

During a speech delivered at the London School of Economic yesterday (9 October), the Bank of England (BoE) governor has called on policymakers to have alternative plans rather than just relying on the institution to pump more cash into the economy.

Since the onset of the global financial downturn, the BoE has issued QE worth some £375 billion ($600 billion) in order to significantly boost its asset purchasing budget and provide the country with greater monetary support.

However, while admitting there is "no technical limit" on how much more stimulus the body could implement, Sir Mervyn said officials cannot be "entirely sanguine" about using loose policy to boost long-term economic prospects.

"The strategy of reducing domestic spending and relying more on external demand is facing a real problem because not everyone can do it at the same time," he added.

By Asim Shah

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