LONDON – UK Prime Minister David Cameron said monetary policy
should take the strain of boosting demand and he argued the government
should stick to its plans to remove the structural deficit during this
In his monthly press conference, Cameron acknowledged there were
risks to the UK recovery, but argued that monetary policy should act to
offset weakness rather than fiscal policy.
Cameron said he had long believed “that actually it’s monetary
policy that is a better lever in terms of trying to make sure that the
economy is progressing and demand is growing.”
“So I have always been a fiscal conservative and a monetary
activist,” he added.
The UK Prime Minister said there has been “a lot of support (for
that policy mix) from the IMF for that in their recent report and I
think that is where we should be focussed.”
There have been media reports of the government easing back on near
term fiscal tightening with the evidence mounting the economic
recovering is losing momentum.
“The British economy is making good progress. The forecasts from
the OBR (Office for Budget Responsibility) are positive. But of course
there are risks to the British economy, what will happen to the American
recovery, how strong is the recovery in Europe, how well is the bank
lending going ?” Cameron said.
“There are lots of moving parts that we have to keep a very close
eye on,” he added.
Talking about this month’s Comprehensive Spending Review, which
will set out the precise departmental spending reductions, Cameron said
the aim remained to get rid of the structural deficit.
“We are going through a very complicated process of trying to get
all the budgets into shape so we can deliver what the Chancellor
announced in his Budget statement.”
“It is not sufficient to halve the deficit in four years. You do
need to get to grips with the structural deficit, otherwise the problem
goes on getting worse,” Cameron said.
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