Another round of QE may be on the cards

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Continuing tensions in financial markets could result in a new credit crunch for businesses and households, according to Bank of England.

In the minutes to its December meeting, the central bank said while uncertain markets have not yet resulted in a credit squeeze for the real economy, the longer they remain strained, the greater the risk.

“For some months, conditions have been difficult in bank term unsecured funding markets, with funding becoming more expensive and relatively little issuance in public markets,” said the minutes.

The Bank said: “The longer higher funding costs and difficulties in accessing markets persisted, the more likely it would be that banks would restrict the availability of credit, or try to pass on higher costs through to businesses and households by raising their rates,” it said.