Tuesday, Dec 16, 2008
Bank of England’s Governor Mervyn King has warned that more will be needed to rescue the UK economy as the Government’s £500bn financial bail-out fails to get battered banks lending again.
In a letter to Chancellor Alistair Darling, Mr King said that “additional measures, building on the Government’s package to support the banking system announced in October, will probably be required to underpin lending to households and companies.”
Despite a blizzard of interest rate cuts from the Bank and a dramatic increase in borrowing by the Government, the economic picture for the UK continues to deteriorates. Manufacturing is contracting faster than expected and figures tomorrow are poised to show a rise in unemployment.
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Mr King has described the persistent unwillingness of Britain’s banks to lend to both individuals and businesses as the single biggest threat to the economy. HBOS, the country’s biggest mortgage lender, last week warned that it was getting no easier to lend as the economy weakens and house prices fall.
Mr King did not elaborate on what extra measures the Bank may consider, but they will almost certainly include cutting interest rates to below 2pc for the first time in UK history, and possibly a move by the Bank to pump cash directly into the economy.
This article was posted: Tuesday, December 16, 2008 at 11:44 am