King: Don't expect lending to resume any time soon
Wednesday, 13 May 2009 4:28 PM
By politics.co.uk staff
Mervyn King has warned people not to expect lending to resume in the near future, at the publication of an economic growth report.
The Bank of England expects the economy to shrink by 4.5 per cent this year.
And the governor gave a mixed message at this morning's launch.
"The economy will eventually heal, but the process may be slow," he said.
On the positive side, fiscal stimuli, depreciation of sterling and a turning of the stock cycle to increase output growth hinted at recovery.
But lowered asset prices and other factors implied a sustained recovery could take longer.
The governor also stressed that the national savings rate would need to rise.
The Tories highlighted the discrepancies between the Treasury and Bank of England forecasts.
"From the moment the Budget was announced, we Conservatives have questioned the government's forecast that there will be a rapid return to boom time levels of growth," said shadow chancellor George Osborne.
"Our judgement has been supported by today's report from the Bank of England. It is a further blow to the credibility of the chancellor and the honesty of the Budget."
The Bank of England also revised its inflation outlook downwards.
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