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
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Arts and Entertainment
Under the skin: Sarah Kane in May 1998
theatreThe story behind a new season of Sarah Kane plays
Arts and Entertainment
Preening: Johnny Depp in 'Mortdecai'
filmMortdecai becomes actor's fifth consecutive box office bomb
Sport
Bradford City's reward for their memorable win over Chelsea is a trip to face either Sunderland or Fulham (Getty)
football
News
Lars Andersen took up archery in his mid thirties
video
Voices
Focus E15 Mothers led a protest to highlight the lack of affordable housing in London
voicesLondon’s housing crisis amounts to an abuse of human rights, says Grace Dent
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

Ashdown Group: Client Services Manager - Relationship Management - London

£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

Recruitment Genius: Credit Controller / Customer Service

£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...

Guru Careers: In-House / Internal Recruiter

£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Day In a Page

Woman who was sent to three Nazi death camps describes how she escaped the gas chamber

Auschwitz liberation 70th anniversary

Woman sent to three Nazi death camps describes surviving gas chamber
DSK, Dodo the Pimp, and the Carlton Hotel

The inside track on France's trial of the year

Dominique Strauss-Kahn, Dodo the Pimp, and the Carlton Hotel:
As provocative now as they ever were

Sarah Kane season

Why her plays are as provocative now as when they were written
Murder of Japanese hostage has grim echoes of a killing in Iraq 11 years ago

Murder of Japanese hostage has grim echoes of another killing

Japanese mood was against what was seen as irresponsible trips to a vicious war zone
Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea