Deputy governor backs money move

The deputy governor of the Bank of England has said it will be "easy" to stop inflation soaring even though £75 billion of extra money will enter the economy to prevent a prolonged recession.

Writing in the Daily Mail, Charlie Bean said that in normal terms a cash injection would lead to "too much money and spending" in the economy and a rise in inflation. However, he wrote that the extra money is needed to prevent the country from entering a "particularly nasty recession".

Last week the Bank announced that it was cutting interest rates by a further 0.5% to a new record low and would start quantitative easing to boost the cash supply in the economy.

By buying up a range of financial assets from the private sector £75 billion will be injected into the finance system in a bid to boost lending and spending.

The deputy governor said that although it sounded "too good to be true", the extra money was needed to help as there is currently not enough money and spending in the economy and "that is what we need to rectify".

Mr Bean said: "As the economy recovers, we will probably need to remove some of the extra money in order to ensure that inflation does not pick up too much.

"But that is easily accomplished by pursuing the process in reverse, namely selling the assets that we have bought back to the private sector."

Although he seemed confident about "printing" more money, he admitted there was "a good deal of uncertainty" over quantitative easing, but said that it should enable the UK to recover from the downturn "sooner rather than later".

The same uncertainty was expressed by Bank of England governor Mervyn King when he announced the plans for the huge stimulus, saying he did not know how long it would take to have an impact.

He said: "Nothing in life is ever certain. Changing interest rates is not certain. These measures, we think, will work in the long run. I can't be sure how long it will take."