The Bank of England´s Deputy governor, Charles Bean, believes that the high levels of uncertainty are reducing the effectiveness of the central bank´s quantitative easing (QE) measures, but not that QE is now impotent per se.

Simply put, he does not believe that the United Kingdom has entered a so-called "liquidity trap", although the heightened uncertainty surrounding events in the Eurozone do call into question how much "traction" lower yields can garner on the real economy.

While Mr. Bean did not comment directly on next week´s meeting of the Monetary Policy Committee (MPC) he did argue against those who would like to see the Bank monetize some of the government´s debt, either by buying state bonds to finance tax cuts or by cancelling some of the gilts which it now holds.

Also with medium and long-term policy implications however, he sided with Governor King in warning that it will take longer for the economy to recover following the financial crisis, on top of which comes the need to change the growth dynamic towards a larger proportion of exports.

Lastly, during his speech, delivered at the University of Hull, Bean reiterated King´s assertion that monetary policy, by itself, could not have prevented the credit and asset price bubbles that preceded the last financial crisis.

AB

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