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Economic outlook worsens, says BoE's King

BoE governor fingers the ongoing debt crisis in the euro zone for the deterioration in the UK

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Bank of England governor Mervyn King said on Tuesday the economic outlook has deteriorated over the past few weeks blaming the ongoing debt crisis in the euro zone.

"In the last six weeks ... I am very struck by how much has changed since we produced our May inflation report," King told the Treasury committee.

"I am pessimistic (about the euro zone outlook). I am particularly concerned because over two years now we have seen the situation in the euro area get worse and the problem being pushed down the road," he said.

The economy slipped into its second recession in four years earlier this year with fears of a prolonged slump rising as companies put investment on hold and exports suffer from the euro zone crisis.

The BoE’s monetary policy committee voted five to four against buying more government bonds with newly created money to boost the economy, but most economists expect another round of quantitative easing in July.

The government and the Bank announced two schemes on 14 June to get credit flowing through the economy by lowering banks' funding costs.

Policymakers Ben Broadbent and Spencer Dale - who both voted against more stimulus in June - as well as David Miles all identified the euro zone debt crisis as the main threat to the economy in their annual reports to parliament.

Photo credit: Reuters


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