BOE’s Carney accuses G20 of failing to adopt measures to boost global growth
Bank of England boss Mark Carney has accused the G20 of failing to adopt measures to boost global growth as he defended central banks and their power to play a role in stimulating economic growth following attacks from critics who say they have run out of ammunition.
Speaking at a meeting of G20 finance ministers and bank governors in Shanghai on Friday, Carney turned on City economists who say the world’s major central banks have done all they can to prevent the global economy from slipping back into recession.
He said: “Several commentators are peddling the myth that monetary policy is ‘out of ammunition’. This is wrong, but the widespread absence of global price pressures demands that our firepower be well aimed.”
The Bank of Japan recently joined the European Central Bank, the Danish central bank, the Swedish Riksbank and the Swiss National Bank in cutting rates to below zero to rescue their economies from deflation and the prospect of recession.
The Federal Reserve raised interest rates in December to calm what it thought was a strongly growing US economy, but a string of poor economic figures since then has put pressure on Janet Yellen, the Fed chair, to reverse the policy at the central bank’s next meeting in March.
Carney has hinted that he is prepared to cut the base rate from 0.5%, but has ruled out following the trend for negative rates, saying it would damage the stability of UK banks and building societies.
William White, a former chief economist of the Bank for International Settlements (BIS), the central bankers’ club, who now chairs the OECD’s review committee, warned that central bankers had “used up all their ammunition” ahead of the World Economic Forum gathering in Davos last month.
Amid steep falls in stock markets that some economists said were a sign of panic among global investors at the worsening economic outlook, he said: “The situation is worse than it was in 2007. Our macroeconomic ammunition to fight downturns is essentially all used up.
