BOE King: Economic Data Not Suggesting "Doom And Gloom"
LONDON (Dow Jones)--Consumers and businesses need to take a balanced view of the outlook for the U.K. economy and not be swayed by reports of "doom and gloom" coming from the financial services and property sectors, Bank of England Governor Mervyn King said Wednesday.
Speaking in a news conference following the release of the central bank's quarterly Inflation Report, King also said it is more likely than not over the next two years that he will have to write a letter to Chancellor of the Exchequer Alistair Darling explaining why the inflation rate has risen above 3%.
In the report, the central bank's Monetary Policy Committee forecast the economy will slow this year.
But King said that relative to its long-term economic performance, the slowdown would be relatively modest and concentrated on the two sectors that were most directly affected by tighter credit conditions: financial services and property.
"It's very striking that once you get away from London and the City, the mood music is really very different," he said. "It's certainly not a message of doom and gloom you get from people who are not connected with financial services and property."
King said slower growth in credit was "a good thing", but added the central bank could adjust its interest rate if the slowdown became too severe.
He said the key problem affecting global credit markets is no longer a lack of liquidity, but concerns about the capital position of banks that have incurred large losses on their investments in securities backed by U.S. subprime mortgages.
He urged banks to fully account for those losses and recapitalize quickly.
"They must be clear about the extent of their losses, and not wait too long to restore their capital positions," he said.
LONDON (Dow Jones)--Consumers and businesses need to take a balanced view of the outlook for the U.K. economy and not be swayed by reports of "doom and gloom" coming from the financial services and property sectors, Bank of England Governor Mervyn King said Wednesday.
Speaking in a news conference following the release of the central bank's quarterly Inflation Report, King also said it is more likely than not over the next two years that he will have to write a letter to Chancellor of the Exchequer Alistair Darling explaining why the inflation rate has risen above 3%.
In the report, the central bank's Monetary Policy Committee forecast the economy will slow this year.
But King said that relative to its long-term economic performance, the slowdown would be relatively modest and concentrated on the two sectors that were most directly affected by tighter credit conditions: financial services and property.
"It's very striking that once you get away from London and the City, the mood music is really very different," he said. "It's certainly not a message of doom and gloom you get from people who are not connected with financial services and property."
King said slower growth in credit was "a good thing", but added the central bank could adjust its interest rate if the slowdown became too severe.
He said the key problem affecting global credit markets is no longer a lack of liquidity, but concerns about the capital position of banks that have incurred large losses on their investments in securities backed by U.S. subprime mortgages.
He urged banks to fully account for those losses and recapitalize quickly.
"They must be clear about the extent of their losses, and not wait too long to restore their capital positions," he said.
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