A worsening of the Eurozone debt crisis could hit the UK through the banking system, Charlie Bean said, listing more asset purchases (QE) as one of the Bank’s likely responses.
“At the February meeting we can take stock -- it’s the meeting when we have our regular quarterly forecasts, so they help provide a context,” Bean told BBC Radio 4. “If we feel it’s necessary to inject further stimulus in the economy to keep nominal spending growing and prevent inflation falling too low two or three years out, then we will certainly be willing to do more.”
Bean added that the Bank has made plans for providing emergency loans to financial institutions that fall into trouble, should the scenario arise. “We’ve also been encouraging the banks to try and build up their capital by not distributing too much of their profits as dividends or bonuses.”
In a separate interview yesterday, Bean’s colleague Ben Broadbent said there was “a material chance of a technical recession”. Yet it would be wrong to “paint only a gloomy picture,” he told the Evening Standard.