King: Economic recovery uncertain
Bank of England Governor Mervyn King has warned that a sustained UK recovery is still uncertain despite the economy's recent stellar growth.Mr King told the Treasury Select Committee that a 1.1% output rise between April and June was "encouraging" but added that a gradual improvement in credit conditions "seems to have come to a halt".
He said: "The wider economic problems around the world underline the fact that we cannot be confident that the recovery in demand, output and employment here in the UK will be sustained."
The Governor stressed that there is a "considerable distance to travel" before interest rates - currently at a record low 0.5% - are back at typical levels. The Bank's rate-setting committee could even increase efforts to boost the money supply.
"The debate is about the appropriate degree of stimulus, not about applying the brakes," he said.
Pressed by committee chairman Andrew Tyrie on whether Chancellor George Osborne's savage emergency Budget had increased the chances of a further slump, the Governor said: "I don't think it made a significant difference to whether we get what is technically known as a 'double-dip' recession."
But he also warned that inflation will remain high throughout most of 2011 in a further blow to households facing rising costs and tough austerity measures, largely down to the Chancellor's VAT hike to 20%.
He cautioned it will be "difficult to bring inflation back down again" if high Consumer Price Index expectations become engrained.
Although Monetary Policy Committee (MPC) member Andrew Sentance is pushing for a rate hike to control inflation, his colleagues are not yet convinced.
IHS Global Insight economist Howard Archer said most MPC members "continue to have considerable concerns about the outlook" but said August's meeting could be a "sparky affair" following much higher than expected growth figures.
Pressed by committee chairman Andrew Tyrie on whether Chancellor George Osborne's savage emergency Budget had increased the chances of a further slump, the Governor said: "I don't think it made a significant difference to whether we get what is technically known as a 'double-dip' recession."
But he also warned that inflation will remain high throughout most of 2011 in a further blow to households facing rising costs and tough austerity measures, largely down to the Chancellor's VAT hike to 20%.
He cautioned it will be "difficult to bring inflation back down again" if high Consumer Price Index expectations become engrained.
Although Monetary Policy Committee (MPC) member Andrew Sentance is pushing for a rate hike to control inflation, his colleagues are not yet convinced.
IHS Global Insight economist Howard Archer said most MPC members "continue to have considerable concerns about the outlook" but said August's meeting could be a "sparky affair" following much higher than expected growth figures.
© 2010 Press Association