UK economy likely to ‘zig-zag’ predicts Mervyn King
The Governor of the Bank of England today predicted further quarters of negative GDP growth this year following the latest -0.2% slump recorded in the last quarter of last year. Britain’s economy is likely to “zig-zag” between positive and negative growth said the Governor, introducing the Bank’s quarterly economic healthcheck. Sir Mervyn said that the pattern would reflect “the additional Bank Holiday for the Queen’s Diamond Jubilee, so that it will be harder than usual to interpret official estimates of growth”.
After three years of interest rates at 0.5% and the Bank’s £325bn quantitative easing programme punishing some retirees, the Governor went out of his way to mention the plight of “savers that continue to receive negligible returns on their savings”.
“we all want to return to a more normal level of interest rates. But if we were to raise interest rates to such a level now that would only to turn a gradual recovery into a recession, put more people out of work, and cut the value of assets on which many savers depend,” argues Sir Mervyn.
The Bank’s inflation report continues to paint a picture of sluggish growth and above target inflation. The more positive news was that the bank feels its prediction for a sharp fall in inflation are being realised, and that should boost squeezed British consumers by the end of the year. The report seemed to communicate that the recently expanded QE programme was likely to be on pause, unless the euro crisis became markedly worse.
Unemployment figures released today also showed a mixed picture. 48,000 jobless were added to the unemployment numbers, taking unemployment to another 17 year high. The rise in unemployment did slow, however, prompting the Government to describe the picture as “flat”. Most City economists expect a further rise in unemployment in the coming months, however to nearly 3 million.
Sir Mervyn said he felt the UK financial system was prepared for what might emerge from the euro crisis. In Europe growth figures for the whole Eurozone today showed a slump of -0.3%, -0.2% for Germany. The French economy surprised most economists by posting growth of 0.2%. During the same period the UK economy contracted by 0.2%.
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There are 3 comments on this post
Faisal,
So that nickname you gave him, “Merve the Swerve,” seems to have assumed semi-corporeal form
Apart from that – not much in there to help our four million unemployed, is there?
Not that I expected anything better……..
In a totally irresponsible and much lighter vein…I am still DYING for you to open a question with, “Mr. King, you are very old…” Gawd knows, he’s got it coming
Faisal – I know that it’s difficult and I applaud your efforts so far, but for goodness sake we have to help the young in this country.
We both know they are getting absolutely hammered on all fronts and are going to be left with no options in life, even the ones with “good” jobs. The housing and pension markets are sewn up. Please try to get a voice out there to help people.
It’s getting beyond a joke now. They are playing on the fact that the young don’t understand financial matters as well as those who are over 35. They really have no chance, and that’s the ones who get a job.
Compassion for the young & the unemployed is probably widespread.
Regrettably, both categories are well-known amongst politicians for being absent when elections come around.
Whilst that apparent alienation is understandable, it is not helpful to their cause. There’s a sad lesson here.
Contrast those absences with pensioners who trot out in all weathers to cast their votes. No wonder their NI pensions remain inflation-linked.