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| Version 1 | Version 2 |
|---|---|
| No let up in inflation warns King | No let up in inflation warns King |
| (about 2 hours later) | |
| The Governor of the Bank of England has warned MPs that inflation, now at 4.4%, is set to exceed targets once again. | The Governor of the Bank of England has warned MPs that inflation, now at 4.4%, is set to exceed targets once again. |
| Mervyn King said "it would not be surprising" if he had to write to the chancellor next week explaining why inflation had exceeded targets of 2%. | Mervyn King said "it would not be surprising" if he had to write to the chancellor next week explaining why inflation had exceeded targets of 2%. |
| He added all advanced economies were facing "testing times", but he saw no reason why the UK could not cope. | He added all advanced economies were facing "testing times", but he saw no reason why the UK could not cope. |
| However, Mr King also warned there was no quick fix for the current mortgage crisis affecting the economy. | However, Mr King also warned there was no quick fix for the current mortgage crisis affecting the economy. |
| He last wrote to Alistair Darling in June, when he warned it was the first of many letters he was likely to have to write - explaining why inflation was beyond the government target - over the coming year. | He last wrote to Alistair Darling in June, when he warned it was the first of many letters he was likely to have to write - explaining why inflation was beyond the government target - over the coming year. |
| "In the UK, we face a difficult but temporary period during which inflation will remain high for a while but output growth, at best, weak," he said. | "In the UK, we face a difficult but temporary period during which inflation will remain high for a while but output growth, at best, weak," he said. |
| He said it would be surprising if he did not have to write to the chancellor next week. | He said it would be surprising if he did not have to write to the chancellor next week. |
| Economic woes | Economic woes |
| "But provided we do not impede the required adjustment we will come through this temporary period and resume a path of normal economic growth with inflation close to target," he added. | "But provided we do not impede the required adjustment we will come through this temporary period and resume a path of normal economic growth with inflation close to target," he added. |
| A Bank of England survey - released just ahead of the Treasury Select Committee - indicated that UK consumers expect inflation to reach 5.4%, the highest level since the survey was first carried out in 1999. | A Bank of England survey - released just ahead of the Treasury Select Committee - indicated that UK consumers expect inflation to reach 5.4%, the highest level since the survey was first carried out in 1999. |
| Meanwhile, some forecasts are predicting that the Consumer Prices Index measure of inflation will surge to 5% from its current level of 4.4% when figures are released next week. | Meanwhile, some forecasts are predicting that the Consumer Prices Index measure of inflation will surge to 5% from its current level of 4.4% when figures are released next week. |
| And with inflation moving higher, the Bank is facing a difficult balancing as it has to weigh rising inflation against slowing economic growth. | And with inflation moving higher, the Bank is facing a difficult balancing as it has to weigh rising inflation against slowing economic growth. |
| Many analysts expect the UK economy to sink into recession during the current year - a recession is defined as two negative quarters of economic growth in a row. | Many analysts expect the UK economy to sink into recession during the current year - a recession is defined as two negative quarters of economic growth in a row. |
| Recent reports from both the European Commission and Organisation for Economic Cooperation and Development have offered a gloomy outlook warning the UK is likely to slip into recession soon. | Recent reports from both the European Commission and Organisation for Economic Cooperation and Development have offered a gloomy outlook warning the UK is likely to slip into recession soon. |
| Lending concerns | Lending concerns |
| Turning to the current credit crunch, Mr King explained the central bank was not in a position to provide long-term liquidity to aid the mortgage market and boost lending. | Turning to the current credit crunch, Mr King explained the central bank was not in a position to provide long-term liquidity to aid the mortgage market and boost lending. |
| He added that special measures to help the industry earlier this year "will not and cannot solve the shortage of funding to finance bank lending, including mortgage lending". | He added that special measures to help the industry earlier this year "will not and cannot solve the shortage of funding to finance bank lending, including mortgage lending". |
| "Only private savers or taxpayers via the government can provide such funds," he added. | "Only private savers or taxpayers via the government can provide such funds," he added. |
| The Bank is due to unveil new plans for a permanent successor to its current Special Liquidity Scheme which lets lenders swap potentially risky mortgage debts for secure government bonds. | The Bank is due to unveil new plans for a permanent successor to its current Special Liquidity Scheme which lets lenders swap potentially risky mortgage debts for secure government bonds. |