Major central banks were running out of tools to fight an economic downturn, Bank of England Governor Mark Carney said in an interview with the Financial Times.
“It’s generally true that 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,” the outgoing governor said.
“If there were to be a deeper downturn, [that requires] more stimulus than a conventional recession, then it’s not clear that monetary policy would have sufficient space” he added.
Carney cautioned that the global economy is heading towards a “liquidity trap” and policy loosening would fail to encourage additional spending.
The governor suggested that the government needs to consider fiscal measures such as tax cuts or public spending to tackle a downturn. He remained optimistic about the economy after the Brexit.