With oil prices and global demand showing a dramatic dip in 2014, the U.K.’s central bank has moved to reassure investors that it could still use stimulus measures despite being on-track to normalize interest rates next year.
Speaking to U.K. lawmakers, Mark Carney, the governor of the Bank of England (BoE), said that it has “considerable flexibility” were it to become necessary to provide extra stimulus.
Carney added that there was a “host of unconventional measures” that could be deployed to battle any kind of falling inflation or deflation – when consumer prices start to fall.
One of the main themes for 2014 has been the lack of demand in the global economy with growth outlooks continually having to be downgraded. In the euro zone, there has been a push for more credit easing, with the bloc fighting stagnant growth and inflation.
In early November, the BoE warned that U.K. price growth is likely to fall below 1 percent over the next six months amid “significant risks” to its inflation projections. It also added that price growth is then expected to rise gradually, returning to “around 2 percent” in three years’ time.