Speaking in front of the House of Lords’ economic affairs committee yesterday, Carney acknowledged the transition from an era of ultra-loose monetary policy posed significant dangers.
“There is a great risk in terms of the execution of [a sale of bonds owned by central banks], he told the committee.
Most economists do not expect the US Fed to ease back on the rate of its asset purchases this month, but some are convinced the central bank will began along the path towards tapering – and an eventual sale of its huge holdings of government debt.
Carney, however, again confirmed the Bank of England would initially tighten policy by raising rates rather than selling its own government debt holdings.
“Quantitative easing] is most effective in times of most distress, but potentially has the most amplification on the other side in times of more normal market conditions,”
But he emphasised that process remains a long way off.
“A return to growth is not a return to normality,” Carney said.
