INTERNATIONAL. British Finance Minister Alistair Darling said yesterday that more Bank of England rate cuts may have a minimal impact on the economy, and that he had discussed whether to start an alternative policy of ‘quantitative easing’.

The BoE lowered interest rates by half a percentage point to a record low of 1% on Thursday, giving little further scope for rate cuts to ease credit conditions, especially as banks are now very reluctant to lend to firms and consumers.

“Where we are just now is that the price of money....is down to 1%. I don’t think it can go much lower than that and still have a difference,” Darling told a BBC chat show.

Some economists are now questioning whether the Bank of England should still wait to lower rates to zero before starting on an alternative policy of quantitative easing, which aims to ease credit conditions by directly boosting the money supply, rather than by cutting banks’ cost of borrowing from the BoE.

The Bank of England gave details on Friday of how it would run a government-backed asset purchase scheme to effectively lend money direct to big companies, a scheme which with Darling’s permission could easily enable quantitative easing.

“The question is, do you put more money in the system? I’m discussing that with the [BoE’s] governor, whether we should give the Bank an extra lever to pull,” Darling said.

“We’re in territory now where countries across the world are having to contemplate things they would not normally look at. We are not in normal times. Right across the world we are seeing economies turning sharply down,” Darling added.

Darling said that there was already a lot of money entering the economy, with lower interest rates, income tax cuts due to take effect in April and extra aid for families and businesses.

“When you take that all in totality we are putting a lot of money into the economy. But it does take time,” he said.

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