The UK faces a sobering decade, warns King
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Mervyn King, governor of the Bank of England says the UK faces a sobering decade and it will be some time before inflation returns to target.
Speaking at the Black County Chamber of Commerce in the West Midlands tonight, King says the next decade will not be “nice” and the history suggests that after a financial crisis the hangover lasts for a while.
He says the next decade will be a Sober decade - a decade of Savings, Orderly Budgets, and Equitable Rebalancing.
But King says it can influence the outcome of the next decade with monetary policy to ensure the amount of money in the economy is growing neither too slowly, as in the recent past, nor too quickly so as to reignite inflation.
King says: “Recently inflation has been high and volatile. It is currently above our 2% target. And the aim of the MPC is to bring it down. But as demand rebalances, we should expect some volatility in inflation as well as in the path of output.”
He says the MPC is conscious that the continuing high level of inflation will persist above target.
King adds: “The MPC is conscious that the continuing high level of inflation poses the risk that inflation expectations many move up. And it may be some time before inflation returns to target.”
He says to achieve a rebalancing in the UK economy, we need to sell more and buy less from overseas economy.
And unless the fall in domestic spending coincides with the necessary increase in net exports, that path for the economy will be bumpy.
He adds: “The biggest risk to an orderly rebalancing of our economy come from abroad. Efforts to restore world demand are impeded by the scale of the imbalances in trade, which are beginning to grow again. If the UK and other low-savings countries are to rebalance their economies, demand for their products must increase overseas.”
He says the Bank of England’s key role has always been to ensure that the economy is supplied with the right quantity of money - neither too much nor too little.
But he says: “In the wake of the financial crisis, and the sharp downturn that followed, the amount of money in the economy as a whole - broad money - is now barley growing at all.”
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Readers' comments (3)
george_tronix | 19 Oct 2010 9:49 pm
Interesting but true coments at last, thank you King!
We made it to the top when we made products that were great.
But since this idea of making quick money & doing third party jobs (which we do as a country) has come about, whats happened?
we lost our factories, we lost our engineering, we lost our experience we lost the genuis who built the best.
No country could ever survive & prosper without making products and servicing them.
in last 30 years, this country has lost the best tradesman, skilled people and what do we have now? beauracrats, laws and sales service - Dont you think any other country out there cannot do this?
Now its time for basics, britain lets sort out our manufacturing NOW
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Ken Wilkinson | 20 Oct 2010 10:30 am
An excellent point, well made George. If only the government and country,as a whole, would take on board that point. I know it is not fashionable to support manufacturing but you only have to look at Germany and even France, to see how true the point is. Whilst in financial Services, I have always supported manufacturing.
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Bobby | 20 Oct 2010 10:44 am
Time for the Razor Blades and Pills chaps.
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