Problems in the eurozone and a slowdown in the global economy have thrown the U.K. economic recovery off-track according to Bank of England governor Mervyn King, Financial Times reported.
King defended the Bank of England’s decision to resume quantitative easing. The BoE had announced an additional £75 billion in QE earlier this month because of the sluggishness in the U.K. economy.
While consumer price inflation rose to 5.2% on an annual basis, the BoE’s monetary policy committee has warned that inflation would rise to over 5% because of pre-announced hikes in utility prices. But said, “…inflation is likely to fall back sharply next year as the influence of the factors temporarily raising inflation diminishes and downward pressure from unemployment and spare capacity persists.”
He also warned that time was running out to solve weakness in banks and sovereign balance sheets. Via Bloomberg:
“A transparent recognition of losses and a substantial injection of additional capital are necessary to restore market confidence.”