|
(CEP News) Frankfurt - Speaking in front of the Treasury Committee on Tuesday, Bank of England Governor Mervyn King said that the BOE faces "major challenges" and that while keeping inflation at 2% will not be straightforward, the BOE must do what it can to ensure that inflation slows to target levels.
King also suggested that inflation would reach levels of 3% or more over the next 12 months and that consumption would slow in the coming months, adding that the BOE will face a challenge in balancing inflation and growth risks. The BOE governor, surprised at how wages have reacted so little to rising inflation, said that he didn't expect this lack of reaction to continue for much longer. The Special Liquidity Scheme (SLS) proposed by the BOE was agreed to by both he and the Chancellor to the Exchequer Alistair Darling, King said, adding that the SLS was aimed at assisting the UK economy and that the central bank's liquidity framework was a good one. He also stated that the SLS, which allowed banks to exchange quality mortgage-backed assets for government bonds, would help the banking sector rather than the mortgage sector. King also said that that tightening in the credit market would negatively affect housing prices. The BOE governor highlighted that the pressure on banks to raise capital was strong and that loss of confidence in banks must be avoided. King also stated that the central bank could not curb the recent rise in Libor. Previous market commentary suggests King is neutral on growth and inflation. By Todd Wailoo,
This email address is being protected from spam bots, you need Javascript enabled to view it
, edited by Nancy Girgis,
This email address is being protected from spam bots, you need Javascript enabled to view it
|
