BANK of England governor Mervyn King yesterday poured cold water on hopes of a sunny economic recovery, warning that the environment will feel “far from normal” for some time.
In a speech about the difficulties of communicating economic forecasts, King reiterated that economic activity would remain well below pre-credit crunch levels, despite the strong bounce back in growth predicted by the Bank.
“Even if growth rebounds, the level of activity is still very likely to remain weak for a considerable period compared to the peak at the start of 2008. The economic environment is likely to continue to feel far from normal for some time,” King said in a lecture at the Royal Society.
The head of the UK’s central bank added: “It is ultimately the level of activity, rather than its growth rate, that matters for employment and the degree of inflationary pressure.”
King said the Bank’s Monetary Policy Committee (MPC) believed that recent gross national product data would be revised higher, but not by enough to override the broad theme of a big decline in output shown in the central bank’s quarterly inflation report.
January inflation data released after the publication of the last inflation report in February was in line with the central projection given by the Bank and inflation data is published today.
City A.M. Reporter