The following are highlights of Bank of England Governor Mervyn King’s comments at a news conference presenting the BOE quarterly inflation report.
COMMENTS ON MONETARY STIMULUS:
“The real question is how much monetary stimulus we inject into the economy and I think what’s quite important that people don’t run away with the thought that because there are uncertainties and unexpected things happen therefore we should abandon the view that the major instruments of macroeconomic policy can work. They can work and the MPC will have to make a judgement month by month as to whether it does or does not want to inject more monetary stimulus.”
COMMENTS REGARDING BOE ASSET PURCHASE PROGRAMME:
“What’s happening in the euro area will affect our asset purchase programme via our judgment about the outlook for inflation and growth in the medium term, but if there were to be major developments in the euro area there are all sorts of ways in which we might have to respond and I don’t want to limit it or to restrict it or to link it one-to-one to the asset purchase programme.”
COMMENTS ON STERLING’S DEPRECIATION:
“The developments in recent weeks have not been entirely unexpected given what is happening in the euro area. We have to accept that and feed that into our judgment as to what we should do for own policy.
“There is no doubt that the big depreciation – 25 percent – that is still intact broadly speaking (and) is a vital part of the rebalancing, it is an absolutely essential part.”
COMMENTS ON THE EURO ZONE:
“We have been through a big global financial crisis, the biggest downturn in world output since the 1930s, the biggest banking crisis in this country’s history, the biggest fiscal deficit in our peacetime history, and our biggest trading partner, the euro area, is tearing itself apart without any obvious solution.