Sir Mervyn King paints gloomy picture of UK

Ben Southwood
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ECONOMIC recovery in the UK is at least five years away, Sir Mervyn King told MPs at the Treasury Select Committee yesterday.

The governor of the Bank of England reiterated his backing for £50bn of further quantitative easing, and even kept open the possibility of an interest rate cut.

The Bank’s monetary policy committee voted unanimously against a rate cut in its last meeting, but narrowly declined to increase asset purchases, with King among the dissenters.

He said he was “struck by how much had changed since the May inflation report”, and declared himself “pessimistic about the Eurozone outlook,” especially since “the problem is being pushed down the road”.

King was also downbeat about Asian prospects, explaining that his vote for “more easing policy” was based on, “the worsening in the position in Asia and other emerging markets”.

Other members of the MPC, including Martin Weale, have suggested that further QE may have little effect as banks are focusing on rebuilding their balance sheets. Weale suggests banks will use the extra funds to deleverage, rather than extend extra credit to consumers.