Bank Of England to Pursue Quantitative Easing to get Rid of Economic Woes

October 07 00:00 2011

New York, October 7 ( РBank of England may go the traditional way to get rid of its economic woes as rumor mill says that the bank is poised to cut its all-important lending rate by 50 basis points.  This will pump more money into the economy and may cause some growth in the short run.

The bank may have to make this move given the fact that most of the interbank lending in the nation is more or less halted due to the growing fears of the ensuing debt crisis. Many banks in England may have exposure to the debts of Italian, Greek and Spanish bonds which are likely to be toxic assets in the future. Thus the Central bank has to intervene and must issue one year money to most banks so that they have the required liquidity to carry on business as usual.

However, growth achieved through quantitative easing always brings along inflation with it. The British economy is currently reeling with 3% inflation. Quantitative easing may bring along with it more woes for the common man as prices of goods may rise higher and meeting household demands becoming increasingly difficult.