THE RUDE AWAKENING ; Presenting the central bank's quarterly forecasts, King gave a gloomier outlook than just three months ago. Worsening inflation in particular points to a further fall in Britons' real wages, which have just hit their lowest since 2003.
"This hasn't been a normal recession, and it won't be a normal recovery," King told reporters.
Britain's recovery from the financial crisis will continue to be slower than most of its peers, and inflation is now likely to remain above the bank's 2 percent target until 2016 - 18 months longer than expected in November, the forecasts showed.
Before the financial crisis, that would have been a signal the central bank would soon raise interest rates, but the governor made clear tighter policy was nowhere on its agenda.
King said high inflation was due to a weaker currency and government-ordered price hikes, not overly-loose monetary policy, and that the central bank should look through the effect of those factors on prices.
This is an approach that is likely to continue to find favor after King steps down in June and is succeeded by current Bank of Canada Governor Mark Carney, who has also championed a "flexible" approach to inflation targeting.
But it does not mean the central bank is about to add to the 375 billion pounds ($587 billion) of bonds it purchased between March 2009 and October 2012. It currently holds just over a third of conventional gilts.
THE RUDE AWAKENING ; Presenting the central bank's quarterly forecasts, King gave a gloomier outlook than just three months ago. Worsening inflation in particular points to a further fall in Britons' real wages, which have just hit their lowest since 2003.
ReplyDelete"This hasn't been a normal recession, and it won't be a normal recovery," King told reporters.
Britain's recovery from the financial crisis will continue to be slower than most of its peers, and inflation is now likely to remain above the bank's 2 percent target until 2016 - 18 months longer than expected in November, the forecasts showed.
Before the financial crisis, that would have been a signal the central bank would soon raise interest rates, but the governor made clear tighter policy was nowhere on its agenda.
King said high inflation was due to a weaker currency and government-ordered price hikes, not overly-loose monetary policy, and that the central bank should look through the effect of those factors on prices.
This is an approach that is likely to continue to find favor after King steps down in June and is succeeded by current Bank of Canada Governor Mark Carney, who has also championed a "flexible" approach to inflation targeting.
But it does not mean the central bank is about to add to the 375 billion pounds ($587 billion) of bonds it purchased between March 2009 and October 2012. It currently holds just over a third of conventional gilts.