14th February 2008
Fall in the pound 'could boost exports'
Retailers will feel that 2008 is their worst year for a decade, but exporters may see a better picture, the Bank of England (BoE)'s governor said yesterday.
Exporters can expect a modest slowing in growth. However the depreciation of sterling may well boost British competitiveness, which could see exporters enjoying healthy growth in the next few years.
Speaking at a press conference after the release of the quarterly inflation report, BoE governor Mervyn King said that as the economy slows and inflation rises, consumers are likely to spend less.
Inflation accelerated to 2.2% in January, a seven-month high, compared with 2.1% in December. According to the report, it is likely to hit 3% by the middle of this year.
"This higher level of energy and food prices is a genuine reduction in our standard of living relative to where it would have been," Mr King said.
"We have to understand that that's not something we can offset by just demanding higher wages, because all that will do is lead to another round of higher prices."
Mr King also hinted that further interest rate cuts would be limited, with mortgage rates "reverting to normal" as a result.
However, he added that the mood was not as bad in all sectors. "There is caution and there is concern, but it's certainly not this doom and gloom message that you get from people connected with financial services and property," he said.
Exporters can expect a modest slowing in growth. However the depreciation of sterling may well boost British competitiveness, which could see exporters enjoying healthy growth in the next few years.
Speaking at a press conference after the release of the quarterly inflation report, BoE governor Mervyn King said that as the economy slows and inflation rises, consumers are likely to spend less.
Inflation accelerated to 2.2% in January, a seven-month high, compared with 2.1% in December. According to the report, it is likely to hit 3% by the middle of this year.
"This higher level of energy and food prices is a genuine reduction in our standard of living relative to where it would have been," Mr King said.
"We have to understand that that's not something we can offset by just demanding higher wages, because all that will do is lead to another round of higher prices."
Mr King also hinted that further interest rate cuts would be limited, with mortgage rates "reverting to normal" as a result.
However, he added that the mood was not as bad in all sectors. "There is caution and there is concern, but it's certainly not this doom and gloom message that you get from people connected with financial services and property," he said.
- 5th January 2009 Businesses urged to make redundancies 'last resort'
- 5th January 2009 'Cut interest rate to 1%' says business group
- 2nd January 2009 Gloomier forecast from business group
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