Britain’s economy will barely grow this year and may have taken a bigger hit from the eurozone debt crisis than thought.
That is the conclusion of the UK central bank which has just slashed its growth forecast to almost zero.
But Governor Mervyn King does not believe urgent new measures are needed to stimulate the economy.
He said cutting interest rates would be counter-productive, but did signal more possible money printing in the marathon effort to get Britain’s economy back on track.
Inevitably King used an Olympic comparison as he spoke to reporters: “Unlike the Olympians who have thrilled us over the past fortnight, our economy has not yet reached full fitness. But it is slowly healing. Many of the conditions necessary for a recovery are in place and the MPC (Monetary Policy Committee) will continue to do all it can to bring about that recovery,”
The problem with printing money – or quantitative easing to give it its official name – is that it boosts inflation.
However the Bank of England did lower its inflation forecast for this year and said consumer spending is likely to benefit from that fall in inflation.
However, the Bank’s report is likely to intensify the debate about whether the British government’s austerity-based policies should be changed to try to kick-start growth.