Growth forecasts should have been cut sooner, admits King

 

Bank of England governor Sir Mervyn King today admitted policymakers should have cut growth forecasts sooner.

Discussing the Bank's latest quarterly inflation report, the governor told MPs the Bank had "inadvertently given too much weight" to optimistic growth forecasts.

Sir Mervyn said there was little chance of rapid growth in 2013 or 2014, adding it "may be unreasonable to expect anything other than a slow and protracted recovery".

In an apparent endorsement of the decision to appoint Bank of Canada governor Mark Carney as his successor, he told the Treasury Select Committee he was "completely confident" the central bank would be left in "very good hands".

The Bank warned in its inflation report earlier this month that economic growth would remain below pre-financial crisis levels for at least the next three years.

Taking the shine off a recent return to growth between July and September, Sir Mervyn said output could shrink again in the final three months of the year.

And the governor braced households for an "unappealing combination" of sluggish growth and above-target inflation.

The Bank downgraded its growth forecast for next year to around 1% and warned that output will remain below its historical average until mid-2015.

In a grilling by committee chairman Andrew Tyrie, Sir Mervyn said forecasts should have been lowered earlier.

"There are times when you debate something and we finally decided our judgment has to change," he said.

Sir Mervyn also admitted the impact of the Bank's quantitative easing programme - injecting emergency money into the economy - becomes less effective the longer it is used.

He added the UK is "reaching the point where it is difficult for conventional monetary policy measures, including asset purchases, to bring spending forward from the future".

The Bank has injected £375 billion into the economy, which Sir Mervyn said had staved off the risk of a much deeper collapse in output in the UK.

PA

Start your day with The Independent, sign up for daily news emails
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine