Former Bank of England Governor Mervyn King said central banks risk tipping the world into a currency war as they pursue ever looser policy to stimulate their economies.
"Many countries have now seen that they've taken monetary policy about as far as it can go," King said in a speech on Tuesday in Oxford, England. "With interest rates close to zero, in some cases below, with fiscal policy constrained in many countries, the objective of economic policy will be to lower the exchange rate."
"There is a real risk that focusing attention on bringing the exchange rate down will become an implicit or explicit currency war," he said.
More than 20 countries have cut interest rates or taken other measures to ease monetary policy -- moves that can curb demand for their currencies -- since the start of the year. In the euro area, European Central Bank loosening has helped push the region's currency down almost 20 percent against the dollar in the past year.
"In countries as far apart as New Zealand, Australia, Japan, France, Italy, central banks and governors are becoming more and more strident in their determination towards the exchange rate," he said. "Some might say we're already in a de facto currency war."
Full article at http://www.bloomberg.com/news/articles/2015-05-12/ex-boe-s-king-says-global-policy-easing-risks-currency-war
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