Recovery is in sight, says Sir Mervyn: Bank of England chief gives Chancellor a boost ahead of the Budget
Becky Barrow and Hugo Duncan
01:20 GMT, 15 March 2013
01:20 GMT, 15 March 2013
The Bank of England's governor said last night that the 'recovery is in sight' in a boost for the Chancellor ahead of his Budget next week.
In a rare television interview, Sir Mervyn King said Britain's anaemic economic growth is finally drawing to an end following the long and painful downturn.
It comes at a time of growing fears that the country could be heading for a triple-dip recession, but his comments suggest any further slump will be short-lived.
Governor of the Bank of England Mervyn King, who said the economic recovery is 'in sight'
He refused to say exactly when he thinks the recovery will begin in earnest, dismissing such predictions as 'silly'.
Sir Mervyn, who retires in June after ten years as Governor, told ITV News: 'We are on track to achieve it [rebalancing of the economy]. Recovery is in sight.' But he added: 'It would be silly of me to pretend that I have a crystal ball that can tell me exactly when things will change. I can't do that.
'All I can say is that with reasonable judgement based on where we are today is that recovery is in sight.' He said that the UK economy would have grown by 1.5 per cent last year if it had not been hit by a collapse in construction and a dramatic fall in North Sea oil production, partly due to the need for unexpected oil rig repair work.
Sir Mervyn added: 'There is momentum behind the recovery that's coming. And I think that during the course of 2013 we will see the recovering come into sight.
'When…I can't possibly tell you and it would be silly of me to pretend that I could.' His words will offer some comfort to millions of hard-working Britons who have endured five long years since the financial crisis plunged Britain into recession in 2008.
The economy is more than three per cent smaller than it was at its pre-crisis peak, and a 0.3 per cent slump between October and December last year rounded off the worst four-year period in peacetime since the 1830s.
The Bank of England governor refused to say exactly when he thinks the recovery will begin in earnest, dismissing such predictions as 'silly'
Pressure is mounting on the Bank and the Treasury to breathe life into the ailing economy amid a punishing squeeze on living standards for millions of workers and pensioners.
The Bank has held interest rates at a record low of 0.5 per cent since March 2009 and pumped 375billion of emergency funds into the economy through quantitative easing in a desperate attempt to stimulate growth.
Senior officials at the Bank have even considered slashing interest rates into negative territory.
Its actions, along with the loss of Britain's once-cherished AAA credit rating, have sent the pound tumbling against the dollar and the euro this year. They have also driven up inflation which has now been above the two per cent target for more than three years.
Sir Mervyn last night strongly denied the Bank was deliberately driving sterling lower in an attempt to boost exports by making goods made in Britain cheaper for foreign buyers.
'We're certainly not looking to push sterling down,' he said. 'We're looking to ensure recovery in the UK economy and gradually bring inflation back to our two per cent target.' He said the pound was now 'broadly stable' but conceded that he did not know where it will go in future.
'The markets determine the level of exchange rate, not us,' said the governor, who will be succeeded by Canadian Mark Carney this summer.
'The fall in the exchange rate earlier this year offset the rise in the exchange rate in the previous year. Basically we're at the same level we were after the impact of the financial crisis. The markets judged then that was the right level for the UK looking ahead and they seem to judge that now.
'We just have to accept that and adjust and without the fall in the exchange rate that did occur from before the crisis to now, our export industry would not be growing as they are and unemployment would be a good deal higher.' ends