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Sir Mervyn King says Economy is Stationary

Sir Mervyn King

There was little movement from the Pound Sterling this morning, until Sir Mervyn King made the announcement that the Bank of England had cut its growth forecast for the UK. The cut has taken the expected growth from 0.8% to zero. The forecast for next year was also cut from 2.4% to 1.9%.

The news came as no real surprise, as many had predicted the cut well in advance, but the Pound rallied on the back of the Bank of England’s report. The head of England’s Central Bank went on to say that the economy had suffered due to the situation in Europe, leaving Britain on edge with the economy almost at a standstill. We were warned of a “long, slow process” that lays ahead as the markets and consumers regain confidence. He even went as far as to say that he expects no significant increase in the interest rate until 2015.

The Bank of England has taken action to help stimulate the economy with schemes such as the £80 billion set aside for loans to small business’ at lower than usual rates. Sir Mervyn King said there had been signs of this particular scheme already having an impact.

Libor Scandal Just Won’t Go Away
The man charged with controlling the current financial crisis then faced questions from MPs over the Libor scandal. When asked why the Bank of England failed to act on the numerous queries from the U.S. regarding the legitimacy of the rates Sir Mervyn said that nobody had brought forward any evidence to suggest anything was untoward. He then went on to say that it went unhighlighted for so long because it targeted such a small section of the financial system, comparing it to the recent spot-fixing scandal that took the cricket world by storm. “Nobody noticed it because the game wasn’t fixed” he went on to say.

Paul Tucker, Sir Mervyn King’s assistant, even admitted that he had not given emails suggesting something “was not quite right” the attention they deserved. The admission from the Central Bank that they should have handled the situation better and will be much more vigilant in the future seemed to be enough to appease most MPs who were present. The BoE also confirmed that Barclays had been dangerously close to crossing the line on a number of different issues of late but the Libor ordeal was the “bale that broke the camel’s back”.

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