Bank of England governor Mervyn King last night warned of an unpleasant, "sober" decade ahead and hinted at further QE ahead of today's government Spending Review.
Speaking to an audience in the West Midlands, King said the next decade would be one of "savings, orderly budgets, and equitable re-balancing" and would "not be nice".
He also warned countries to guard against trade protectionism to avoid consequences similar to the collapse of the global economy in the 1930s.
King said the re-balancing of the economy would take some time.
"The next decade will not be nice," he said. "History suggests that after a financial crisis the hangover lasts for a while."
He said it may be some time before inflation returns to its 2% target and raised hopes the Bank may inject more money into the economy through quantitative easing (QE). It has so far added £200bn.
The amount of money in the economy at the moment was "barely growing at all", he said, adding it was a "key role" for the Bank to provide stimulus when the economy was in need.
Some economists predict the BoE could inject at least another £100bn into the economy following the next meeting of its Monetary Policy Committee next month.
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