30
Jul
Bank of England governor hints rates will stay low
The governor of the Bank of England, Mervyn King, has said he is
more concerned about the strength of the recovery than
inflation.
His comments, made during an appearance in front of the House of
Commons' Treasury Committee, suggest he believes interest rates
should stay low for the foreseeable future.
Mr King said he could not be confident that growth was firmly
established.
Latest figures show the UK economy grew by 1.1% in the second
quarter.
The gross domestic product (GDP) figures were stronger than had
been expected.
But Mr King said there was no pressing need to rein in rising
growth or curb inflation. He said: "The debate is about the
appropriate degree of stimulus, not about applying brakes."
The latest minutes from the Bank's Monetary Policy Committee
(MPC), which sets interest rates, showed one member out of eight
voted to raise rates from their current level of 0.5% to curb
inflation.
The central bank governor's comments were in harmony with a
report from the National Institute for Economic and Social Research
(NIESR).
'Political theatre'
The think tank said that growth would not pick up over the rest of
the year, leaving annual economic growth at a sluggish 1.2% because
of cuts in government spending.
NIESR questioned whether cuts of the scale planned were
necessary for the UK.
One of its researchers, Ray Barrell, said: "The idea of a
Greek-style crisis in the UK was always very unlikely. The
'emergency' budget was more about political theatre than economic
necessity."
NIESR's views have an added importance as the think tank's head,
Martin Weale, has just become the MPC's ninth member.
He will cast his first vote on the level of interest rates next
week.
Source: www.bbc.co.uk/news/business