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.

Arts and Entertainment
Game Of Thrones
Uh-oh, winter is coming. Ouch, my eyes! Ygritte’s a goner. Lysa’s a goner. Tywin’s a goner. Look, a dragon
tvSpoiler warning: The British actor says viewers have 'not seen the last' of his character
Arts and Entertainment
'New Tricks' star Dennis Waterman is departing from the show after he completes filming on two more episodes
tvOnly remaining original cast-member to leave long-running series
Esteban Cambiasso makes it 3-3
premier league
The Etihad Stadium, home of Manchester City
premier leaguePlus updates from Everton vs Palace
people'I hated him during those times'
Britain's shadow chancellor Ed Balls (L) challenges reporter Rob Merrick for the ball during the Labour Party versus the media soccer match,
peopleReporter left bleeding after tackle from shadow Chancellor in annual political football match
Dame Vivienne Westwood has been raging pretty much all of her life
peopleFirst memoir extracts show she 'felt pressured' into going out with the Sex Pistols manager
Arts and Entertainment
Lauryn Hill performing at the O2 Brixton Academy last night
musicSinger was more than 90 minutes late
ebooksAn unforgettable anthology of contemporary reportage
Lewis Hamilton in action during the Singapore Grand Prix
Formula OneNico Rosberg retires after 14 laps
Rumer was diagnosed with bipolarity, attention deficit hyperactivity disorder and post-traumatic stress disorder: 'I was convinced it was a misdiagnosis'
peopleHer debut album caused her post-traumatic stress - how will she cope as she releases her third record?
Arts and Entertainment
tvReview: 'Time Heist' sees a darker side to Peter Capaldi's Doctor
peopleActress tells men: 'It's your issue too'
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

Senior BA - Motor and Home Insurance

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Market Risk & Control Manager

Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Day In a Page

Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam