The Bank of England should inject more money into the economy to strengthen the road to economic recovery, according to a member of the monetary policy committee.
Adam Posen suggested that quantitative easing (QE) should be resumed to increase the supply of money in the UK – a strategy that has pumped £200 billion into the economy already.
In a speech to the Hull and Humber Chamber of Commerce he advocated action and posited that current measures alone, such as low interest rates, would not be sufficient to promote a recovery.
Mr Posen said: “The case I wish to make is that monetary policy should continue to be aggressive about promoting recovery, and subject to further debate, I think further easing should be undertaken”.
He added: “Policymakers face a clear and sustained uphill battle, in which monetary ease has an ongoing role to play. 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”.
Earlier this month the MPC had decided to keep QE at the £200 billion level and leave interest rates unchanged at 0.5 per cent. Member Andrew Sentence was the only one to vote for a raise in rates for the fourth consecutive month.