It’s time to warm up the printing presses. When growth evaporates and governments feel politically unable to cut spending or raise taxes, there’s only one tool left: printing more money. We can expect more of it soon. As James says today, Osborne believes he has created the conditions where the Bank of England can do some more Quantitative Easing and it could start as early as next month; an unusual move, given how high inflation is. But the Bank is (as ever) forecasting a return to the 2 per cent target soon – and may now claim that economic weakness makes an undershoot likely.
And so (the logic will run) it’s time for more QE so as to keep inflation to target. The other arguments for QE are harder to make. Last time, it was supposed to boost bank lending – that didn’t really happen.
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