Bank of England-recovery 'fragile'

Wednesday 12th August 2009

The Bank of England has warned economic recovery may be "slow" and "fragile" in its inflation report today.

The Bank's monetary policy committee said the "recession appeared deeper than previously estimated" saying despite efforts made to support it, recovery timing is highly uncertain.

Over the past few months the Bank has reduced base interest rates to historically low levels, keeping them at 0.5 per cent, and last week made a 'shock decision' to extend quantitative easing by a further £50 billion to £175 billion.

The Bank's inflation figures predicted "more likely than not" the annual rate of growth on consumer prices would fall below one per cent in the autumn, temporarily.

Governor Mervyn King remained relatively pessimistic about the economy, warning public finances were in a poor state. "The pace of recovery over the next few years is highly uncertain," he said.

He added while the growth rates may pick up, the actual levels of economic output will remain low and unemployment will stay high.

"I'm tempted to say, it’s the levels, stupid," Mr King told reporters.

"It is the levels that matter, not growth rates."

"In terms of growth rates it may look like the economy is getting back to normal growth, but it won't feel like that. It means unemployment is high and rising."

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