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 Bank of England governor warns of triple-dip recession

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Posts : 35
Join date : 2012-11-10

PostSubject: Bank of England governor warns of triple-dip recession    Fri Nov 16, 2012 12:54 am

Bank of England governor warns of triple-dip recession

The Governor of the Bank of England, Sir Mervyn King has issued a bleak assessment of the prospects for the UK economy and warned that GDP is likely to contract in the fourth quarter.

Sir Mervyn warned that he expects the economy to continue with its zig-zag pattern of contraction followed by growth.

The Bank of England now expects the UK economy to grow by just 1.2 per cent, down from its prediction of 1.8 per cent in August, just three months ago.

Presenting the central bank’s Quarterly Inflation Report, Sir Mervyn said: It is difficult to discern the underlying picture. It is probably neither as good as the zigs suggest nor as bad as the zags imply.”

Sir Mervyn said that just as the second quarter’s growth figures gave a misleading picture of the economy as being weaker than it actually was due to one-off factors such as the extra bank holiday due to the Queen’s Diamond Jubilee, so the growth of one per cent booked for the third quarter was not an accurate reflection of the economy as it included the bounce back in activity from the extra bank holiday and the one-off accounting receipt from Olympic ticket sales.

The Bank of England has cut its growth forecast for the UK economy, it expects growth to remain well below its historic trends and does not expect to see the UK regaining its pre-2008 level of output until 2015.

Sir Mervyn King said: “GDP growth is more likely to be below than above its historical average rate over the entire forecast period.

“We have decided the chances of a rapid recovery are a good deal less than we thought.”

The governor warned that the UK economy may already be contracting again, raising the possibility of the UK entering an unprecedented triple-dip recession.

Howard Archer, Chief UK & European Economist at IHS Global Insight said: “The November Quarterly Inflation Report and Sir Mervyn King’s accompanying comments suggest that the door is very much open to more Quantitative Easing. It also reinforces belief that the Bank of England is likely to keep interest rates at 0.50% for a very long time to come.”

Tuesday saw the consumer prices index (CPI) measure of inflation jump by 20 per cent from 2.2 per cent in September to 2.7 per cent in October.

Meanwhile, yesterday saw the publication of the latest unemployment figures that showed a fall of 49,000 in the last quarter, down to 2.51 million, the lowest level for over a year.

The Quarterly Inflation Report, published on Wednesday says that inflation is now expected to remain above two per cent throughout the rest of this year and through 2013. Sir Mervyn said that he does not expect inflation to fall to the bank’s official target of two per cent until sometime in 2014.

Sir Mervyn King said: “We face the rather unappealing combination of a subdued recovery with inflation remaining above target for a while. An unfavourable external environment continues to shape our prospects.”

The governor once again put the blame for slow growth and higher than expected inflation at the door of the euro debt crisis, the global economy and “price increases in sectors where market influences are weak,” such as the near tripling of tuition fees and domestic utility price increases.

As a result of this bleak assessment for the outlook of the UK economy, Sir Mervyn hinted that the central bank could resume its asset-purchase programme of quantitative easing (QE) sooner rather than later.

In its meeting earlier this month, the Monetary Policy Committee (MPC) decided not to add to the £375 billion of government bonds purchased to support the UK economy. In the report, Sir Mervyn said that more could follow but stressed that there are limits to what monetary policy could achieve.

He said: “It may be unreasonable to expect anything other than a slow and protracted recovery.”

The shadow chancellor, Ed Balls, said: “This sobering report shows why David Cameron and George Osborne’s deeply complacent approach to the economy is so misplaced. Their failing policies have seen two years of almost no growth and the Bank of England is now forecasting lower growth and higher inflation than just a few months ago.”
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PostSubject: Re: Bank of England governor warns of triple-dip recession    Fri Nov 16, 2012 5:47 am

The Bank of England has been flooding the market with virtual money by the billions in the amazing sleight of hand referred to as quantitative easing. The oft quoted reason is to keep the loan rate for mortgages and business down- defying the gravity of normal inflation. Of course this has effectively devalued all our savings and pensions putting millions of vulnerable at risk by diluting the amount of money in circulation without increasing the value of underlying assets. The figure quoted here 275 billion is actually about five thousand pounds for every man woman and child in the UK!!! But this is only one tranche of this fiscal lunacy!

The Germans tried this strategy in the 1930 and it didn't go well then. Basic economics appears far too difficult for our leading bankers - and obviously far, far too difficult for our barking mad chancellor whose best idea for solving catastrophic insolvency is taxing pasties while giving his rich cronies a tax deduction. So take a deep breath and lets join hand with the yanks and jump off the fiscal cliff together.

The only reason we are not in the same position as Spain, Portugal and Greece is that these countries simply cant churn out Euros as it is a common currency. But we will still have to pay for the injections of sterling conjured by the wizards of Threadneedle street. Do they understand the nature of consequences. The only sane person either side of Atlantic appears Angela Merkel because she has learnt the bitter truth from German economic history
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