MPC got it wrong on growth, King admits

 

The Bank of England's Monetary Policy Committee was too slow to lower its growth forecasts to reflect the deteriorating outlook for the UK, Sir Mervyn King said yesterday, as an independent think-tank predicted that the British economy would expand by just 0.9 per cent next year.

"We should have done it earlier and we didn't," Sir Mervyn King told the Commons Treasury Select Committee at a hearing on the Bank of England's November Inflation Report. He added: "There are times when you debate something and you finally decide, well look, this judgement really has to change now."

The Governor was asked by the committee's chairman, Andrew Tyrie, why the MPC's forecast fan charts in previous reports had shown a possibility of UK growth bouncing back strongly. Sir Mervyn replied: "Looking back, I think we wish we had not done that in earlier Inflation Reports but… there comes a point where you say we really are now pretty convinced that it doesn't make sense [to present such a forecast]."

Last month, an external review of the MPC's growth forecasting performance in recent years by David Stockton, a former official at the US Federal Reserve, noted that the Bank had failed to carry out a "systematic, detailed quantitative analysis" of its mistakes in this area. Another review of the Bank by the veteran financier Bill Winters criticised the institution's culture under Sir Mervyn and said that less senior staff at the bank were "often unwilling to challenge their superiors". Sir Mervyn told the committee: "I don't think I recognise those concerns".

Sir Mervyn's appearance came as the Organisation for Economic Co-operation and Development slashed its forecast for the British economy in 2013 to 0.9 per cent, following a contraction of 0.1 per cent this year. The Paris-based think-tank, echoing the advice of the International Monetary Fund, also recommended that the Chancellor should not impose further austerity further to meet his target of reducing the national debt by 2015-16 if growth continued to come in lower than hoped.

Meanwhile, the Office for National Statistics yesterday confirmed that the UK economy grew by 1 per cent in the third quarter of 2012, but many analysts expect a return to contraction in the final three months of the year. The latest growth official growth estimate showed that the Olympics boosted household spending in the third quarter and also tourism.

"If anything, the details in the new data further highlight the temporary nature of the upturn," said Chris Williamson, an economist at Markit. "Payback is likely in the fourth quarter, with the country facing a slide back into contraction."

Benitez out, King in?

George Mudie, a Labour MP on the Treasury Select Committee, said that the decision to transfer the coupon payments from the Bank's £375bn quantitative easing programme to the Treasury had left Sir Mervyn King looking "as independent as a Chelsea manager". The Governor pointed out that at Chelsea, currently led by Rafa Benitez, "few managers have managed to survive 10 years". Sir Mervyn said he would have been rightly accused of being "despotic" if he had refused.

PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
Money
Welcome to tinsel town: retailers such as Selfridges will be Santa's little helpers this Christmas, working hard to persuade shoppers to stock up on gifts
news
News
i100
News
people
Arts and Entertainment
Architect Frank Gehry is regarded by many as the most important architect of the modern era
arts + entsGehry has declared that 98 per cent of modern architecture is "s**t"
Arts and Entertainment
Soul singer Sam Smith cleared up at the Mobo awards this week
arts + entsSam Smith’s Mobo triumph is just the latest example of a trend
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

Compensation and Benefits Manager - Brentwood - Circa £60,000

£60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...

Data Analyst/Planning and Performance – Surrey – Up to £35k

£30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...

IT Systems Business Analyst - Watford - £28k + bonus + benefits

£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

Markit EDM (CADIS) Developer

£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

Day In a Page

Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

Wilko Johnson, now the bad news

Former Dr Feelgood splits with manager after police investigate assault claims
Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

Mark Udall: The Democrat Senator with a fight on his hands

The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
New discoveries show more contact between far-flung prehistoric humans than had been thought

New discoveries show more contact between far-flung prehistoric humans than had been thought

Evidence found of contact between Easter Islanders and South America
Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

Cerys Matthews on Dylan Thomas

The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
DIY is not fun and we've finally realised this as a nation

Homebase closures: 'DIY is not fun'

Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

Air New Zealand's wizard in-flight video

The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

Pumpkin spice is the flavour of the month

The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
11 best sonic skincare brushes

11 best sonic skincare brushes

Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

Paul Scholes column

I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

While other sports are stalked by corruption, we are an easy target for the critics
Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

Lost in translation: Western monikers

Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

Handy hacks that make life easier

New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

KidZania: It's a small world

The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker