Mervyn King, Bank of England governor, has spoken out to disclose the severity of the current financial crisis. Mr King stated that the crisis is surely the worst the UK has experienced in the last eighty years and possibly the most severe in UK history.
Prior to the comments made by Mr King, the Bank of England approved the introduction of an additional £75bn to the economy via quantitative easing.
There is divided opinion amongst economists as to whether quantitative easing should be used as a measure to aid economic hardship. In the past, Chancellor George Osborne has expressed doubt over the method however; he has now stated that it is a necessary course of action in the current economic conditions. In addition, Mr Osborne has agreed with the claims made by Mervyn King regarding the gravity of the financial crisis. He explained that despite describing quantitative easing as a measure only to be used when all other options have been exhausted two years ago, due to the extreme financial condition the government inherited, serious action needs to be taken.
The new injection of £75bn by the Bank of England comes after it has already dispersed £200bn into the economy through the purchase of government bonds.
The Bank’s Monetary Policy Committee has been divided over the passed few months as to whether to introduce Quantitative Easing or if increasing interest rates would be enough to bring down increasing inflation levels. In addition it was unsure as to whether anything should be done at all.
Speaking to Sky News Mr King explained that the priority in these unfamiliar conditions is to remain calm and rationally decide upon the right course of action. He went on to assert that presently, quantitative easing is the right and necessary course of action to help the economy.
Earlier this week, data revealed that in the second quarter, the UK’s economy grew by 0.1%, a lot less than originally believed.
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