Sterling is falling. Hurrah! The needed rebalancing of the UK economy calls for a further depreciation of the real exchange rate. If the call by Sir Mervyn King, governor of the Bank of England,

for ￡25bn in asset purchases at the February meeting of the Monetary Policy Committee delivers a significant decline in sterling, he has delivered a lucky policy strike.

Sir Mervyn laid out requirements for a durable economic recovery in his presentation of the inflation report earlier this month: “We must focus our efforts in two areas. The first is to put in place measures aimed at boosting the supply capacity of our economy?.?.?.?The second is to find ways of boosting overseas demand for our products in order to bring about the rebalancing that the UK economy needs to see.”