Governments ‘to keep printing money beyond 2013’

Central banks must keep pumping money into their economies this year, according to Hermes Fund Managers.

Chief economist Neil Williams (pictured) said the US, UK and Japan would likely be forced into continuing quantitative easing (QE) programmes throughout 2013 as economic data would remain weak.

He said even the European Central Bank - which has stopped short of printing money to combat its banking crisis so far - would be forced to resort to QE once it “feels the cold winds of deflation”.

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“The woeful labour market and only deferred fiscal threat in the US means Ben Bernanke’s Federal Reserve will likely expand its asset purchases through 2013,” Mr Williams said.

“Replicating the US in the 1930s would see QE sustained for another decade.”

He added that the “real threat” of another period of recession in the UK could lead to the Bank of England pumping a further £400bn into the economy.

During 2012, the Bank of England increased its QE programme - which involves buying government bonds and other assets to put cash into the financial system - by £100bn.

The Federal Reserve put in place an extension of its own QE programme in September, which will see it buy up $40bn (£25.2bn) of assets every month until the labour market improves significantly, while Japan also unveiled further QE amounting to ¥11trn (£77.4bn) in September.