Bank of England optimistic for economic growth

| September 21, 2012
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Sir Mervyn King, the governor of the Bank of England, expects the UK economy to return to growth in the next quarter, marking an end to the double-dip recession.

Speaking on Channel 4 News, Sir Mervyn warned that recovery would be slow and said that the continuing crisis in the eurozone creates uncertainty for British business.

“I think we’re beginning to see a few signs now of a slow recovery, but it will be a slow recovery.

After a banking crisis one can’t expect to get back to normal and I fear it will take a long time,” he said.

Sir Mervyn also expressed his sympathy for pensioners who are worse off as a result of the Bank’s quantitative easing programme (QE), but said there had been no other option.

Without QE the economy would have gone into ‘freefall’ he said, and then everyone, including pensioners, would have been even worse off.

The bank has pumped £375 billion into the economy, causing annuity rates to plummet to an all-time low.

In the early 1990s, retirees with a pension pot of £100,000 would have received a pension of £15,650 a year for life.

Today, a pot this size would buy a pension of just £5,800 a year.

Separately, Sir Mervyn has given his backing to the Chancellor George Osborne.

Mr Osborne is facing pressure to revise his debt-cutting timetable as it seems likely that the government will miss its target.

Sir Mervyn said that it would ‘be acceptable’ to miss the target in the face of the slowing world economy.

“If it’s because the world economy has grown slowly and so we, in turn, have grown slowly then it would be acceptable to be in that position,” he said.

In order to meet its debt reduction target the government would have to consider measures such as further welfare cuts and tax increases, which would be unpopular with the already hard-pressed public.

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