Mortgage News
King warns of ‘choppy’ UK recovery after GDP shock
Bank of England chief Mervyn King said the shock contraction in GDP figures proves the UK recovery will be “choppy” but he appeared to rule out immediate interest rate rises.
In light of the 0.5% slow in UK growth revealed yesterday, the bank governor spoke out to defend the coalition government’s economic growth policy saying the cuts were needed to bring the deficit under control, the FT reports.
At a conference in Newcastle last night, King said: “The right course has been set and it is important to maintain it.”
He added the British economy is “well placed for a return to sustained, balanced growth” and sent a strong sign changes to interest rates are not on the table, although he warns inflation could reach 5%.
He said the central bank neither could, nor should, try to prevent that squeeze in living standards “half of which is coming in the form of higher prices and half in earnings rising at a lower rate than normal”.
An ultra-loose monetary policy was the right one to have in place, despite high inflation, King said.
Why new-build property investment is appealing to a new generation of landlords
Sponsored by BM Solutions
He also refuted any suggestion the Bank might have gone too far in lowering interest rates to 0.5% and pumping £200bn in to the economy.