<P> In a fractional reserve monetary system the money supply will contract when repayments of bank loans (destroying money) exceed the amount of new credit extended . During the great depression, for example, the money supply fell by approximately 35% . </P> <P> Quantitative easing may cause higher inflation than desired if the amount of easing required is overestimated and too much money is created by the purchase of liquid assets . On the other hand, QE can fail to spur demand if banks remain reluctant to lend money to businesses and households . Even then, QE can still ease the process of deleveraging as it lowers yields . However, there is a time lag between monetary growth and inflation; inflationary pressures associated with money growth from QE could build before the central bank acts to counter them . Inflationary risks are mitigated if the system's economy outgrows the pace of the increase of the money supply from the easing . If production in an economy increases because of the increased money supply, the value of a unit of currency may also increase, even though there is more currency available . For example, if a nation's economy were to spur a significant increase in output at a rate at least as high as the amount of debt monetized, the inflationary pressures would be equalized . This can only happen if member banks actually lend the excess money out instead of hoarding the extra cash . During times of high economic output, the central bank always has the option of restoring reserves to higher levels through raising interest rates or other means, effectively reversing the easing steps taken . </P> <P> Economists such as John Taylor believe that quantitative easing creates unpredictability . Since the increase in bank reserves may not immediately increase the money supply if held as excess reserves, the increased reserves create the danger that inflation may eventually result when the reserves are loaned out . </P> <P> In the European Union, World Pensions Council (WPC) financial economists have also argued that artificially low government bond interest rates induced by QE will have an adverse impact on the underfunding condition of pension funds, since "without returns that outstrip inflation, pension investors face the real value of their savings declining rather than ratcheting up over the next few years". </P>

When did the bank of england stop quantitative easing