View more on these topics

King defends low base rate stance

The governor of the Bank of England has defended the Monetary Policy Committee’s decision to keep the base rate on hold at 0.5% for over two years by claiming such a stance is necessary to rebuild the economy.


Speaking at Mansion House last night, Sir Mervyn King said that raising interest rates significantly in the aftermath of the financial crisis would have resulted in a weaker economic recovery and further falls in output than have been seen.

And he says that while such a policy may have brought inflation closer to its 2% target today, it would not have prevented the squeeze on living standards arising from higher oil and commodity prices and government austerity measures.

King says that the MPC’s mix of tight fiscal and loose monetary policy is necessary to rebalance the economy, and to change this broad policy mix would make little sense.

He says: “Of course, at some point, bank rate will need to rise to more normal levels in order to ensure that inflation returns to its 2% target.

“The MPC is watching extremely carefully for any signs of a pick up in domestically generated inflation and it will take action as soon as it is appropriate to do so.

“So far, subdued rates of increase in average earnings, as well as remarkably – some might say disturbingly – low growth rates of broad money have provided strong signals that inflation will fall back in due course.”

King also warned that the UK faces at least another three years of economic pain before a recovery begins.

He says: “The world economy is adjusting from an unstable disequilibrium to a new equilibrium.

“In more biblical language, failure to tackle the imbalances during the seven years of plenty before 2007 threatens seven lean years thereafter for at least part of the world economy.”



IFAs can help secure equity release clients

My last couple of articles have looked at referrals from clients, solicitors, estate agents and mortgage brokers. Now I’m going to turn my attention to the greatest lead generator of them all financial advisers. I refer to those financial planners who enjoy a long-term client relationship by providing a fee-based holistic life planning service, as […]


July 4 is confirmed as the date Citri will be put into liquidation

Citri’s financial adviser Begbies Traynor has confirmed the firm will be placed into liquidation on July 4. Begbies Traynor has not yet been appointed as liquidator but says it expects to be following the collapse of a rescue deal. It is thought a third party was looking to buy part or all of Citri, which […]

Banks can exit credit scheme early

The Treasury is changing the rules of the Credit Guarantee Scheme to allow banks to reduce their participation in it ahead of schedule. The scheme became operational at the height of the credit crunch in October 2008 and closed to new issuance on February 28 2010. The Treasury charges a fee to a bank or […]


News and expert analysis straight to your inbox

Sign up