29 August 2010
Central banks may face further tasks, says BoE's Bean
Quantitative easing may need to be extended, Charles Bean says
Central banks may have to provide more economic support amid afragile global recovery, the deputy governor of the Bank of England has warned.
Charles Bean said policymakers had prevented a financial market collapse but further action might be required.
He wasspeaking at the Economic Policy Symposium in Jackson Hole, Wyoming.
At the same event, US Federal Reserve chief Ben Bernanke set out "unconventional" policy options to boost the US economy.
Theevent, which attracts leading central bank figures, is this year focused on monetary policy lessons from the recent crisis.
'Emergency Use Only'
Presenting a report to the conference, Mr Bean said thatthe Bank of England had been unable to prevent the crisis because its powers - primarily the setting of interest rates - were not powerful enough.
He also hinted that there may be a need to increaseso-called quantitative easing - the pumping of new money into the economy.
"The deleveraging process is incomplete, the recovery remains fragile and a considerable margin of spare capacity is yet tobe worked off, while further policy action may yet be necessary to keep the recovery on track," he said.
But he added that "normal times will surely return in due course".
Mr Bean also said thatgovernment purchase of securities - such as bonds and shares - was an effective way for central banks to ease financial conditions in a crisis.
However, he insisted that adjustments to interest ratesshould be used in normal times, with asset purchases "best kept in the locker marked For Emergency Use Only,"
Later this year, the coalition government will unveil details of new powersfor the Bank to try and head off any future crisis.
And Mr Bean used his speech to set out examples how these could underpin "macro-prudential policy" under the Financial Regulations Bill.
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