Monetary hits can’t do it all

City A.M. Reporter
MONETARY policy cannot do all the work of stimulating the economy, Bank of England head Sir Mervyn King said last night in the US.

“There are limits on the ability of domestic monetary policy to expand real demand in the face of the need for changes in the real equilibrium of the economy,” King told an IMF conference in Washington DC.

“I do not believe that the present problems in the UK stem only from a large negative shock to aggregate demand,” he added.

King said that rebalancing in the economy was as important as overall levels of demand.