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| Version 1 | Version 2 |
|---|---|
| 'Fragile recovery' for UK economy | 'Fragile recovery' for UK economy |
| (40 minutes later) | |
| The Bank of England has warned that the UK economy still has some way to go before it recovers from the effects of the financial crisis. | The Bank of England has warned that the UK economy still has some way to go before it recovers from the effects of the financial crisis. |
| In its latest quarterly Inflation Report, the Bank warns that any recovery in 2010 will be "fragile". | In its latest quarterly Inflation Report, the Bank warns that any recovery in 2010 will be "fragile". |
| The report will be bad news for the chancellor, who has predicted that the UK will rebound sharply in 2010. | The report will be bad news for the chancellor, who has predicted that the UK will rebound sharply in 2010. |
| If it does not, then his record budget deficit of £175bn will be even bigger, with a greater need for spending cuts. | If it does not, then his record budget deficit of £175bn will be even bigger, with a greater need for spending cuts. |
| On the outlook for inflation, the Bank said it was "more likely than not" that the annual rate of growth in consumer prices would temporarily fall below 1% in the autumn. | On the outlook for inflation, the Bank said it was "more likely than not" that the annual rate of growth in consumer prices would temporarily fall below 1% in the autumn. |
| 'Uncertain pace' | 'Uncertain pace' |
| The Bank has recently added another £50bn of new money to the economy, as part of its programme of quantitative easing (QE) to spur economic growth. | |
| Its report said there were "encouraging signs" that the steps taken to stimulate the economy had been having an impact. | Its report said there were "encouraging signs" that the steps taken to stimulate the economy had been having an impact. |
| However, Bank governor Mervyn King was downbeat about whether the policy had been fully effective. | However, Bank governor Mervyn King was downbeat about whether the policy had been fully effective. |
| Given the depth of the recession, to erode the margin of spare capacity will require an extended period of robust growth Mervyn KingBank of England governor | |
| He hinted that the Bank might have to consider additional measures, although he warned that with the public finances in such a perilous state, there was little room for further expansion to help boost economic growth. | He hinted that the Bank might have to consider additional measures, although he warned that with the public finances in such a perilous state, there was little room for further expansion to help boost economic growth. |
| "The pace of recovery over the next few years is highly uncertain," he added. | "The pace of recovery over the next few years is highly uncertain," he added. |
| Following his comments, economists suggested the bank would inject more new money into the economy. | Following his comments, economists suggested the bank would inject more new money into the economy. |
| "More quantitative easing is on the cards," said Charles Davis from the Centre for Economics and Business Research. "Our rough and ready estimate is a further £50bn." | "More quantitative easing is on the cards," said Charles Davis from the Centre for Economics and Business Research. "Our rough and ready estimate is a further £50bn." |
| "The reality of a deep recession and sluggish recovery has dawned upon [the Bank], recognising that insipid growth and downward pressure on prices is the greater concern." | "The reality of a deep recession and sluggish recovery has dawned upon [the Bank], recognising that insipid growth and downward pressure on prices is the greater concern." |
| Spare capacity | |
| The weak outlook for inflation was driving the Bank to continue with its policy of QE for the foreseeable future, deputy governor Charles Bean said. | |
| Mr King warned that "given the depth of the recession, to erode the margin of spare capacity will require an extended period of robust growth". | |
| He warned that such a recovery could be "slow and protracted". | |
| Since its last report in May, the Bank has revised its view of how deep the recession was during the last quarter of 2008 and the first quarter of 2009. | |
| It now says that the very depth will make any sustainable recovery unlikely until banks and governments rebuild their balance sheets. | |
| What this means in practical terms, says BBC economics reporter Steve Schifferes, is that it does not expect banks to resume large-scale lending for some years to come. | |
| And the need for further cutbacks in public spending and or higher taxes will add to the deflationary pressures on the economy, our reporter adds. | |
| The governor refused to be drawn on whether he regarded the Conservatives' plans to hand over regulatory powers to the bank as a good thing. | |
| But he did warn against "half-baked" schemes of financial reform being adopted at the upcoming G20 summit. |