13th August 2008
There will be no growth in the economy over the next year, according to the Bank of England.
Governor Mervyn King offered a gloomy vision of the current state of the economy, and warned that worse times may still be ahead.
In a foreword to the latest inflation report, he said that he expected growth to be flat, and suggested there is even the possibility of a recession. He also warned that Consumer Price Index (CPI) inflation would reach a 5.0%.
The Bank is charged by the Government with maintaining CPI inflation at 2.0%, but it rose to 4.4% in July - the highest mark since the recession of the early 1990s.
King said: "The British economy is going through a difficult and painful adjustment - to higher energy and commodity prices, and in banking, credit and housing markets.
"This adjustment to our economy cannot be avoided."
King also said that he doubted the mortgage market would ever return to pre-credit crunch levels, while the re-adjustment process to higher commodity prices and a different philosophy of credit would be painful. However, he said that he believes there is light at the end of the tunnel.
"The next year will be a difficult one, with inflation high and output broadly flat.
"But with monetary policy focused on its task of bringing inflation back to the target, we will come through the adjustment," added King.
Gloomy times for economy set to continue
Governor Mervyn King offered a gloomy vision of the current state of the economy, and warned that worse times may still be ahead.
In a foreword to the latest inflation report, he said that he expected growth to be flat, and suggested there is even the possibility of a recession. He also warned that Consumer Price Index (CPI) inflation would reach a 5.0%.
The Bank is charged by the Government with maintaining CPI inflation at 2.0%, but it rose to 4.4% in July - the highest mark since the recession of the early 1990s.
King said: "The British economy is going through a difficult and painful adjustment - to higher energy and commodity prices, and in banking, credit and housing markets.
"This adjustment to our economy cannot be avoided."
King also said that he doubted the mortgage market would ever return to pre-credit crunch levels, while the re-adjustment process to higher commodity prices and a different philosophy of credit would be painful. However, he said that he believes there is light at the end of the tunnel.
"The next year will be a difficult one, with inflation high and output broadly flat.
"But with monetary policy focused on its task of bringing inflation back to the target, we will come through the adjustment," added King.
Tags: Employment, Retail & Shop
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