Bank of England Governor warns financial crisis not yet over
Speaking at the British Bankers’ Association (BBA) annual conference, the Bank of England’s Governor, Mervyn King has painted a bleak picture of the current economy and stated that after over 10 years of economic stability, we are now facing a period of rising inflation and falling economic growth.
Mr King warned that the financial crisis is not yet over and hee acknowledged the fact that since the crisis erupted last summer, the Bank has had disagreements with commercial lenders about how to respond.
Addressing the BBA, Mr King said he would like to see a framework established for financial stability that is on as sound a footing as the one that they have successfully established for monetary stability.
Mr King hinted that he will make the Special Liquidity Scheme a permanent fixture and said intends to learn from the experience of the scheme to put in place a liquidity facility that works in all seasons, both ‘normal’ and ‘stressed’.
He said that the Bank was also to address the problem of the ‘stigma’ attached to banks that use central banks’ facilities.
Last month, King warned that the British economy faces recession. He said households are facing a protracted spending crunch as food and fuel bills continued to increase.
He added that financial strains would intensify the sharp economic downturn already taking hold and ruin chances for steep interest rate cuts to improve growth.
The International Monetary Fund (IMF) recently said this is the worst period of financial stress since Great Depression in the 1930s.
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