LONDON– Mark Carney, the Bank of England governor who plans to step down in March, said the world’s central banks have few tools left to avoid a recession.
Speaking to the Financial Times, Carney expressed concerns over becoming stuck in a liquidity trap in which traditional monetary policy changes have no effect on the economy and a looser policy has no effect on spending. Among the reasons for that trap: persistently low interest rates globally, the Financial Times reported.
“There’s much less ammunition for all the major central banks than they previously had, and I’m of the opinion that this situation will persist for some time,” Carney said.
Carney told the Financial Times central banks will need to find other tools, such as quantitative easing and guidance on future interest rate changes. But he said even that might not be a solution and any answers might be out of the hands of central banks.
Instead, Carney told the Times, when it comes to a recession governments will need to consider fiscal tools such as tax cuts and increases in public spending.