THERE is no guarantee that borrowing will become easier despite an emergency move to pump £75bn into the economy, Bank of England governor Sir Mervyn King has warned.

Sir Mervyn told a heated meeting of the Treasury Select Committee that the latest round of quantitative easing should limit the shortfall in bank lending that is hurting the recovery.

But the governor told MPs he could not guarantee that banks would loosen their purse strings at a time when they are under pressure to hoard more capital.

Sir Mervyns evidence hearing came after Martin Weale, who sits on the Banks Monetary Policy Committee (MPC), warned the economy was at risk of contracting in the final quarter of 2011.

Weale said: Obviously there is the risk of another recession and its higher than one might have thought a few months ago.

Sir Mervyn was criticised for not doing enough to help small to medium enterprises (SMEs) and for launching the latest round of quantitative easing (QE) at the risk of driving up inflation, which hit 5.2% in September.

The Bank hopes boosting QE from £200 billion to £275 billion will help the recovery by encouraging financial institutions to lend more and spend more on other assets, such as shares.

But Sir Mervyn said: I cant guarantee that it means that bank lending will rise, but what I do believe is that it wont fall as far as it might otherwise have done.

I think the action will make a difference to the amount of lending, but it certainly doesnt guarantee that lending to the real economy is positive.

George Mudie MP accused the Bank of ignoring the Governments calls to help SMEs but Sir Mervyn dismissed this as complete nonsense.

He said: What really matters for SME lending is to alter the incentives banks have to lend to them.

The Government has unveiled proposals to lend to SMEs through a credit-easing scheme in a sign that its Project Merlin agreement with the UKs biggest banks has failed.

The banks under Project Merlin agreed to increase the amount of credit they made available to SMEs to £76 billion this year.

Sir Mervyn faced criticism that the latest round of QE could push up the cost of living but he insisted that inflation would fall back next year as the effect of the increase in VAT to 20% and the recent hikes in utility bills were annualised.

He added: When we undertook the next round, we did it because we thought there was a real risk of inflation looking ahead going below the target and we wanted to offset that.

The Bank also came under fire for waiting too long to launch QE2, but he said the committee was finally prompted to take action by the marked deterioration in the eurozone and world economy in recent months.

Asked whether he felt responsible for high inflation, he said: I accept responsibility for not pushing interest rates up earlier this year or last year.

We did that because we were faced with a difficult decision and we felt it was better than pushing the economy into a deep recession, with higher unemployment.