Central bank gets permission to print more cash

The Bank of England has recently been given the go ahead to print more money, with the Monetary Policy Committee being told that it can increase monetary supplies if it feels that the move is necessary to get the financial sector back on its feet. It is hoped that the green light given by the chancellor will help to kick start the flagging economy.

Alistair Darling, the Chancellor of the Exchequer, gave the green light earlier this month to the £50 billion asset purchase plan, which will allow banks to trade illiquid assets for cash, which will then enable them to re-enter the credit markets and start lending again.

The Treasury has stated that more could be done to revive the economy by the Monetary Policy Committee being able to increase money supplies through the go ahead for the Bank of England to print more money. A Treasury official said: ‘The programme also provides a framework for the MPC to use asset purchases for monetary policy purposes should the MPC conclude that this would be an additional tool for meeting the inflation target.’

However, some are concerned about the move, stating that it could be a dangerous one. Vince Cable from the Liberal Democrats said: ‘It would be a very dangerous course of action and if it went wrong there could be high inflation afterwards. But if we get into the dire straits of deflation then governments have no choice but to take drastic measures. These are policies for truly knife-edge situations.’