Prudential chief executive Tidjane Thiam has warned the incoming Bank of England governor Mark Carney that Britain is at risk of more economic turmoil unless quantitative easing is brought to a halt.
Thiam reportedly warned Carney that QE is an “amazing distortion” and while it was the correct policy to pursue in the immediate aftermath of the crisis, the governor should not increase the size of the programme.
According to the Telegraph Thiam, speaking at a private breakfast, said: “QE was a good short-term fix. In 2008, 2009 and 2010 it was the right answer. But now, it is different.
“We are just storing long term trouble by minimising short term pain.”
Thiam warned QE is having a negative effect on growth and damaging savers and said reliance on cheap money without a sensible exit plan would leave the door open for inflation shocks, which would throw the economy off course.
He said: “In the macro economy: savings equal investments. But QE is depressing savings and therefore depressing investment. This means, QE is depressing growth.
“It is a really strange economic strategy because everyone is looking for growth – but the monetary policy is completely anti-growth. There is no other exit to indebtedness than growth.”
So far the BoE has created £375m of money through QE since it first launched the programme in March 2009.