Britain faces years of pain, warns Mervyn King

mr_fishbulb

http://www.cityam.com/news-and-analysis/britain-faces-years-pain-warns-mervyn-king

Wednesday, 20th January 2010

STEVE DINNEEN

THERE are bleak years ahead for the British economy, according to the governor of the Bank of England.

Interest rates will have to rise to combat the return of inflation and the standard of living will drop, said Mervyn King in an explosive speech at the University of Exeter last night.

He believes it will take years before the economy is completely recovered from the slump.

His words came just hours after new statistics showed the rate of inflation surged by one per cent last month. The Consumer Price Index (CPI) hit 2.9 per cent – well above the Bank’s target of two per cent. It was up from 1.9 per cent in November.
And King believes inflation will rise to well over three per cent.
He said: “The patience of UK households is likely to be sorely tried over the next couple of years.

“There is little scope for growth in real take-home pay, which may remain weak even as output recovers. It is clear that inflation is likely to pick up markedly in the first half of this year. The full impact of the financial crisis has yet to be seen.”
He also criticised the government’s plans to reduce the budget deficit as too unambitious, saying swifter action is required. The budget deficit stands at £178bn and Darling has pledged to halve this by 2014.

The comments will be seen as a slap in the face for Labour, whose election campaign hinges on its commitment to improving the UK economy. Figures expected next week will confirm Britain has emerged from the recession.
The Conservatives last night seized on the speech, reiterating their pledge to cut spending quicker than Labour.

Also in this letter, the City AM editor says:

Investors will soon start to build in an inflation and bubble risk premium when dealing with the UK, further damaging what’s left of our international credibility. It is time to end quantitative easing and to hike interest rates – there is no time to lose.

Given that a thread yesterday said the housing market could withstand an interest increase of 0.5% before affecting the market, it's worrying that this could be reached and breached soon.

2010

Britain faces years of pain, warns Mervyn King

Well we certainly have under Broon!

doire_2

http://news.bbc.co.uk/1/hi/uk/8469373.stm

leftieM

2010 wrote: »

Britain faces years of pain, warns Mervyn King

Well we certainly have under Broon!

Come off it. We had years of low inflation, steady prices, steadily increasing standards of living, low unemployment and easing of pressure on the poor with the tax credits system. It's been great. I'm sorry it's all over.

carolt

Well, Hamish has, anyway.

stueyhants

leftieM wrote: »

.... It's been great. I'm sorry it's all over.

Have you looked at what has happened to social mobility over the last decade. It hasn't been great. A small % of the population have made out like bandits and the gap between the rich and poor has increased.

ses6jwg

stueyhants wrote: »

Have you looked at what has happened to social mobility over the last decade. It hasn't been great. A small % of the population have made out like bandits and the gap between the rich and poor has increased.

Glad I'm not poor then.

stueyhants

ses6jwg wrote: »

Glad I'm not poor then.

Labour have trapped millions in the benefit trap rather than address the real causes of poverty, it just frustrates me when people think Labour are the party to help the poor.

Classic example is the education system, there has to be a selection proccess to get in to good schools (i.e. all schools should be good, but practically that isn't going to happen). A lot of the selection was done on ability (grammer schools), labour hates selection by ability. So what have they achieved, selection by parents income through increased house prices in good school catchment areas.

chucky

stueyhants wrote: »

So what have they achieved, selection by parents income through increased house prices in good school catchment areas.

i agree with the post but i'm not convinced about this bit - which came first; the good school or the value of houses in the catchment area?

bo_drinker

So many on here thought the recession was going to come and go just like that. It's early days yet.

1984ReturnsForReal_2

[STRIKE]Sock[/STRIKE] Suck on this McPrattish