February 18, 2009

Britain likely to start ‘printing money’

The Bank of England is likely to begin printing money to ward off deflation, a leading British economist said.

The question is when will -- rather than will -- the Bank of England engage in quantitative easing, Howard Archer, chief economist at HIS Global Insight said to The Times of London.

Minutes from the most recent Monetary Policy Committee meeting show the nine committee members agreed bank Gov. Mervyn King should write Chancellor of the Exchequer Alistair Darling to seek permission to take the steps to pump money into the economy.

The practice known as printing money involves bank purchases -- frequently purchases of government bonds -- to increase the money supply.

The Consumer Price Index in Britain fell to 3 percent in January but the bank forecast it would fall to near zero until 2012.

Increasing the money supply is intended to ward of deflation, a dynamic in which prices fall, prompting consumers to stop spending in hopes prices will continue to drop.