Warning over deflation puts pound on slide
Bleak outlook: Sentance said it would take some time for the rate cuts of the last few months to make their full effect on the economy
11 April 2012
A member of the Bank of England's monetary policy committee today warned a deep recession could trigger a period of "persistent and prolonged" deflation, sending the pound into a spin.
Andrew Sentance said there was "a strong case" for quantitative easing, a modern form of printing money. Sterling fell 0.56 of a cent to $1.4504.
Sentance said: "If the recession is prolonged and deep, there is an increased risk of deflation. A persistent and prolonged deflation still remains an outside risk. There is a strong case for providing additional stimulus to the economy to head it off more decisively. With interest rates approaching zero that would point to the potential use of quantitative easing."
