The Bank of England’s deputy governor yesterday mounted a robust defence of its preparations for creating money to buy government bonds, insisting that the proposals were nothing like the ruinous policies of corrupt governments elsewhere that have led to hyper-inflation.
Charlie Bean said some parts of the press had described the policy – the technical term for which is 'quantitative easing' – as 'printing money', linking it with the spectre of national bankruptcy.
But he insisted the aim would be limited to pushing 'up the rates of growth of the supply of money and credit'.
The Bank’s rule of thumb, he revealed, was that if cash spending was growing by “around 5%” a year, this was 'consistent with the achievement of the 2% inflation target'. The Bank is concerned that inflation could fall too low alongside a very weak economy.