King urges G20 to get its act together

Bank worried international trade and currency disputes could derail recovery

The chances of a sustained economic recovery in Britain depend crucially on events in the rest of the world, the Governor of the Bank of England, Mervyn King, has warned.

Speaking at the launch of the Bank's latest Inflation Report, its definitive view of the country's economic prospects, Mr King raised the spectre of protectionism to warn world leaders gathering in Seoul for the G20 summit of the need to reach agreement on a "gradual path" to resolve the currency and trade disputes that have flared violently in recent days.

Asked about the German finance minister's remark that the US Federal Reserve's $600bn (£374bn) injection into America's economy was "clueless", Mr King said he thought that there had been too many public interventions in recent days. However, he signalled his own differences with the US Treasury Secretary, Timothy Geithner, who has floated a cap of 4 per cent of gross domestic product for current account surpluses – aimed at China.

Mr King said: "It is very important that the fundamental point that is recognised at the weekend [will not be] decisions on instruments or exchange rates or targets for current account balances in terms of a number, but that there is a path along which the current account imbalances unwind. I hope that at the G20 meeting we will get a co-operative message rather than some of those that we have been getting in the last few days and weeks."

On a range of issues from house prices to private job creation and the possibility of a very sharp slowdown early next year as government spending cuts bite, Mr King offered an upbeat view. "The central view is clearly not that there will be a significantly sharp slowdown in growth from the last two quarters," he said.

The private sector, added Mr King, "can" generate enough jobs to prevent unemployment soaring. "Whether it will depends on many things which are not within our control and depend in part on the world economy. Yes, I am confident that it can," he said.

In words that may come back to haunt him, the Governor confessed that he did not see the real estate scene as being as "worrisome" as the IMF did.

Whatever his intentions, Mr King's view of the economic world is strikingly similar to the Treasury's. He admitted that members of the MPC may have a different view of fiscal policy, just as they differed on monetary policy. Some within the Bank are said to be privately critical that the Governor's support for the deficit reduction plan has blurred the Bank's political neutrality.

The Bank now thinks inflation will be higher during 2011 than previously thought – about 3.5 per cent in the first quarter of next year rather than the 3 per cent suggested in the August report. Mr King said that, had it not been for the rise in international commodity prices, the hikes in VAT this year and next, and the depreciation of sterling, inflation might well be heading for 1 per cent. It will be the first quarter of 2012 before it falls back below its 2 per cent target, and late 2011 for output to return to pre-recession levels.

The picture for growth was basically unchanged from the August Report – 2.5 per cent growth in GDP in 2012. This compares with the Office for Budget Responsibility's 2.3 per cent figure. However, the Bank's Inflation Report fan chart shows a large risk that the growth figure will be worse.

Start your day with The Independent, sign up for daily news emails
Life and Style
love + sex
Arts and Entertainment
Victoria Wood, Kayvan Novak, Alexa Chung, Chris Moyles
tvReview: No soggy bottoms, but plenty of other baking disasters on The Great Comic Relief Bake Off
Ashley Young celebrates the winner for Manchester United against Newcastle
footballNewcastle 0 Man United 1: Last minute strike seals precious victory
Life and Style
Tikka Masala has been overtaken by Jalfrezi as the nation's most popular curry
food + drink
Arts and Entertainment
Seth Rogan is one of America’s most famous pot smokers
filmAmy Pascal resigned after her personal emails were leaked following a cyber-attack sparked by the actor's film The Interview
Benjamin Netanyahu and his cartoon bomb – the Israeli PM shows his ‘evidence’
ebooksA special investigation by Andy McSmith
Arts and Entertainment
80s trailblazer: comedian Tracey Ullman
Life and Style
A statue of the Flemish geographer Gerard Kremer, Geradus Mercator (1512 - 1594) which was unveiled at the Geographical Congree at Anvers. He was the first person to use the word atlas to describe a book of maps.
techThe 16th century cartographer created the atlas
Arts and Entertainment
Stephen Tompkinson is back as DCI Banks
tvReview: Episode one of the new series played it safe, but at least this drama has a winning formula
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Graduate Application Support Analyst

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Reach Volunteering: External Finance Trustee Needed!

Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

Christine McCleave: FP&A Analyst

£36,000 - £40,000: Christine McCleave: Are you looking for a new opportunity a...

Recruitment Genius: Sales Executive - OTE £40,000

£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

Day In a Page

War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable
Living with Alzheimer's: What is it really like to be diagnosed with early-onset dementia?

What is it like to live with Alzheimer's?

Depicting early-onset Alzheimer's, the film 'Still Alice' had a profound effect on Joy Watson, who lives with the illness. She tells Kate Hilpern how she's coped with the diagnosis
The Internet of Things: Meet the British salesman who gave real-world items a virtual life

Setting in motion the Internet of Things

British salesman Kevin Ashton gave real-world items a virtual life
Election 2015: Latest polling reveals Tories and Labour on course to win the same number of seats - with the SNP holding the balance of power

Election 2015: A dead heat between Mr Bean and Dick Dastardly!

Lord Ashcroft reveals latest polling – and which character voters associate with each leader
Audiences queue up for 'true stories told live' as cult competition The Moth goes global

Cult competition The Moth goes global

The non-profit 'slam storytelling' competition was founded in 1997 by the novelist George Dawes Green and has seen Malcolm Gladwell, Salman Rushdie and Molly Ringwald all take their turn at the mic
Pakistani women come out fighting: A hard-hitting play focuses on female Muslim boxers

Pakistani women come out fighting

Hard-hitting new play 'No Guts, No Heart, No Glory' focuses on female Muslim boxers
Leonora Carrington transcended her stolid background to become an avant garde star

Surreal deal: Leonora Carrington

The artist transcended her stolid background to become an avant garde star
LGBT History Month: Pupils discuss topics from Sappho to same-sex marriage

Education: LGBT History Month

Pupils have been discussing topics from Sappho to same-sex marriage
11 best gel eyeliners

Go bold this season: 11 best gel eyeliners

Use an ink pot eyeliner to go bold on the eyes with this season's feline flicked winged liner
Cricket World Cup 2015: Tournament runs riot to make the event more hit than miss...

Cricket World Cup runs riot to make the event more hit than miss...

The tournament has reached its halfway mark and scores of 300 and amazing catches abound. One thing never changes, though – everyone loves beating England
Katarina Johnson-Thompson: Heptathlete ready to jump at first major title

Katarina Johnson-Thompson: Ready to jump at first major title

After her 2014 was ruined by injury, 21-year-old Briton is leading pentathlete going into this week’s European Indoors. Now she intends to turn form into gold
Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot