Business

Bank of England governor hints rates will stay low

The governor of the Bank of England, Mervyn King, has said he is more concerned about the strength of the recovery than inflation.

Media playback is unsupported on your device
Media captionMervyn King: "It's right to keep our foot firmly on the monetary accelerator"

His comments, made during an appearance in front of the House of Commons' Treasury Committee, suggest he believes interest rates should stay low for the foreseeable future.

Mr King said he could not be confident that growth was firmly established.

Latest figures show the UK economy grew by 1.1% in the second quarter.

The gross domestic product (GDP) figures were stronger than had been expected.

But Mr King said there was no pressing need to rein in rising growth or curb inflation. He said: "The debate is about the appropriate degree of stimulus, not about applying brakes."

The latest minutes from the Bank's Monetary Policy Committee (MPC), which sets interest rates, showed one member out of eight voted to raise rates from their current level of 0.5% to curb inflation.

The central bank governor's comments were in harmony with a report from the National Institute for Economic and Social Research (NIESR).

'Political theatre'

The think tank said that growth would not pick up over the rest of the year, leaving annual economic growth at a sluggish 1.2% because of cuts in government spending.

NIESR questioned whether cuts of the scale planned were necessary for the UK.

One of its researchers, Ray Barrell, said: "The idea of a Greek-style crisis in the UK was always very unlikely. The 'emergency' budget was more about political theatre than economic necessity."

NIESR's views have an added importance as the think tank's head, Martin Weale, has just become the MPC's ninth member.

He will cast his first vote on the level of interest rates next week.

Related Internet links

The BBC is not responsible for the content of external Internet sites