Vince Cable has called on the Bank of England to be prepared to restart its £200bn quantitative easing (QE) programme, admitting that "weak demand" represents a major threat to the British economy.
In a pamphlet for the Centre Forum think-tank, the Business Secretary said: "Where action is needed to sustain demand, and it currently appears to be, the best instrument available is the expansion of the money supply through QE."
He denied encroaching on the independence of the central bank, writing: "It is surely right and sensible to have an open debate on the relationship between the Bank's action and wider policy in this unprecedented... economic environment".
The Bank's Monetary Policy Committee (MPC) kept interest rates on hold this month, but did not vote to extend the programme of bond purchases.
Mr Cable also hinted that "more creative" mechanisms to increase the supply of credit might be needed.
This week, the arch dove on the MPC, Adam Posen, proposed that the Bank of England and Government should co-operate to establish a new bank to channel funding to businesses.
The Business Secretary referred in his pamphlet to "a more targeted asset purchase directly linked to the real economy like corporate bonds or a securitised bundle of SME loans".Reuse content