Rates guru: print more cash

A FORMER Bank of England interest rate-setter has warned that the country will have to keep printing money – despite fears this could lead to soaring inflation.

David Blanchflower, who sat on the Bank of England’s Monetary Policy Committee from 2006 to 2009, told The Mail on Sunday: ‘If it were a real war and we were being invaded, we wouldn’t just raise the white flag because we couldn’t afford it, so debt has to rise. Can we afford to fight the war against the virus? Yes. We have to.’

Last month, the Treasury issued £45billion of Government

bonds – or gilts – to raise money to get Britain through the crisis. Analysts estimate the UK could end up issuing a total of £285billion of gilts this financial year.

Reports that emerged last month suggest that when the stock market crashed in midMarch, the Debt Management Office, which organises the sale of gilts for the Treasury, was on the cusp of failing to complete a bond auction for the lockdown rescue package.

So the Bank of England stepped in to buy £200billion of gilts via its quantitative easing programme – a process that amounts to printing more money. If that auction had failed it would have been the first gilt sale to collapse since March 2009, during the banking crisis.

Blanchflower, now a professor of economics at Dartmouth College in the US, said: ‘The Bank of England will keep buying gilts until the market calls its bluff, but we are nowhere near that stage. That might happen if there is inflation, but at the moment there is no prospect of that. So it’s all hands to the pump.’