Wednesday, 11 February 2009
Will the penny drop?
Bank of England Governor Mervyn King said the U.K. is in a “deep recession” and pledged to cut interest rates and increase the supply of money in the economy.
“Further easing in monetary policy may well be required,” said King at a press conference in London after presenting the central bank’s revised quarterly forecasts. “That is likely to include actions aimed at increasing the supply of money in order to stimulate nominal spending.”
The Bank of England’s forecasts show the economy will contract at an annual 4 percent rate by the end of the first quarter and inflation will slow to 0.5 percent at the end of next year.
Bank of England policy makers cut the benchmark interest rate to the lowest ever on Feb. 5 and may start buying corporate debt in the next few days as they seek other ways to aid the British economy. Cabinet minister Ed Balls said this week that the government faces an economic crisis worse than the Great Depression of the 1930s.
“Given its remit to keep inflation on track to meet the 2 percent target in the medium term, the projections published by the committee today imply that further easing in monetary policy may well be required,” said King.
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