The governor of the Bank of England said on Tuesday that Britain’s recovery from recession is fragile, and that the next few months are likely to be volatile.
Governor Mervyn King told a Parliamentary committee that recovery appeared to have stalled in the euro area, Britain’s largest export market.
“The tensions that underlay the build up of large world imbalances have not been resolved,” Mr. King told the House of Commons Treasury Committee. “And, at home, bank lending to the nonfinancial sector continues to fall.”
While the bank’s rate-setting Monetary Policy Committee expects a gradual recovery, Mr. King said, risks remain on the downside.
Mr. King said the Bank’s 200-billion pounds ($310 billion) economic stimulus programme of asset purchases, combined with a record low base rate, will provide a boost for some time. The effect of the purchases is to increase the supply of money in the economy, a measure taken to counter steep downturns.
He noted that Britain’s economy also benefited from a fall in the value of the pound in 2007 and 2008. That makes British exports more competitive on price.
“Judging how these various factors will play out is an extremely difficult challenge,” Mr. King said.
