Time is running out for the Governor of Bank of England Mervyn King in the wake of the weakness in the economy forces policy makers to endure rising inflation and abstain from raising rate of interest.
With sixty two economists in a Bloomberg News survey mentioning, that the bank will leave its benchmark interest rate at a record low of 0.5% today, investors have added to bets on a rise in the former year half. According to ex-rate setter DeAnne Julius the bank
requires to make the policy tight sooner than later or else have a threat of losing its credibility.
While Mervyn King believes that there is in reality no alternative for lessening the national deficit, he also asserts that the country will now have to face the crisis for generations to come.
Supporting the anger of the union activists, he remarked that these people had all the rights to show their resentment over the damage that the bakers had happened to wreak on the economy.
On Wednesday, transport employees started a strike, when Mervyn King cautioned Trades Union Congress in Manchester that there was no other option to having a “clear and credible” plan to decrease the “unsustainable” budget shortfall.
The Governor of Bank of England in Manchester told executives that the trade unions are not wrong in walking out of their jobs to show their anger. It’s not their fault that the economy is going through a rough patch.
Initially the projections for the budget discrepancy then the balancing down of economic development forecasts; now an entree of blunder in inflation projection: it is tough to remind a period when official call scrutinizing important regions of the UK economy have left so shoddily skewed and poise in them has been so injured as now.
Preceding week the Bank of England let down its projection of 2011 economic development, completed just three months ago, from 3.4 per cent to a more pragmatic however still sanguine by 2.5 per cent.
Bank of England Governor Mervyn King said that the ratings agencies might be unsure about UK's financial position but he does not feel any threat of downgrade in its status.
On being asked by Parliament's Treasury Committee, regarding the ratings, King said, "I don't believe the rating agencies are concerned, in the sense that they are not re-rating the UK and I would be very surprised if they were to do so".
Idiosyncratic factors such as return of VAT to its pre-recession level of 17.5 per cent and an increase in energy prices pushed inflation to 3.5 per cent in January, the Bank of England Governor Mervyn King wrote a letter to the Chancellor.
It may be noted here that the Bank of England had a target of keeping inflation under 2 per cent.
Mervyn King, the governor of the Bank of England, yesterday suggested that Britain should conduct a ‘radical’ overhaul of its financial system and praised US President Barack Obama's controversial proposals for shaking up the Wall Street.
Last week, Mr. Obama hinted that banks could be could be prevented from undertaking high-risk trading practices and could be split up into separate retail and investment businesses.
It was forwarded by Bank of England Governor Mervyn King that as the U.K. financial system came to the brink of collapse, two British banks got within hours of a liquidity shortfall on Oct. 6, 2008, and the day after.
King was quoted saying today, "Two of our major banks which had had difficulty in obtaining funding could raise money only for one week then only for one day, and then on that Monday and Tuesday it was not possible even for those two banks really to be confident they could get to the end of the day."
The Consumer Prices Index plunged to 1.6 per cent in August as compared with 1.8 per cent in July and well below the Bank of England's 2 per cent mark.
This was the lowest figure since Jan. 2005, however higher than analysts' projection of 1.4 per cent.
Data compiled by the Office for National Statistics said in spite of higher fuel costs, lower food prices dragged the Consumer Prices Index down.
Gas and electricity bills showed little change.
The Bank of England has come to the conclusion that the quantitative easing program has showed little signs of improvement as the amount worth £125 billion put so far into the economy came back to bank via investors.
The Bank said the money received from the sale of gilts is being spent on the purchase of bank shares rather than buying other assets. Investors' this step kept the broad money within the banking sector.