Bank of England governor says world economy set for a liquidity trap

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The economy in the globe is heading for a liquidity trap which is going to undermine the efforts of the central bank to avoid any recession in the future as per the Bank of England governor Mark Carney. In an interview which he had given recently, the governor who is coming to the end of his tenure has said that these banks were now running out of the firepower which was needed for the combating of a downturn. This trap takes place when on rare occasions the monetary policy has lost all the effectiveness and manage the swings in the economy and the loosening of the policy is not able to encourage any spending additionally. The general truth is that there is a lot less ammunition for every major bank than they had previously got and he was of the opinion that this is a situation which might be persisting for a bit of time. This means that there is a need right now for looking into the supplements to the monetary tools which include the guidance on future rates of interest, quantitative easing and the cuts in interest rates.

He felt that in the event of a downturn which was deeper there is going to be a requirement of a more stimulus than the usual recession and then it is not going to be clear that there would be enough space in the monetary police. In spite of there being concerns for a downturn potentially, he stayed confident of the condition of the economy once Brexit takes place. He felt that there was no point in the financial hub that London is to be taking its rules from the European Union

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