King’s alarm signals more stimulus on cards for UK
King added his voice to growing global frustration with Europe’s inability to tame its crisis, saying failure to deal with it would lead to “significant adverse consequences.” The Bank of England cut its growth and inflation forecasts, a month after raising its bond-purchase target by £75 billion ($118 billion) to aid the recovery.
“We’re on the knife-edge of another recession,” said Richard Barwell, an economist at Royal Bank of Scotland Group in London and a former Bank of England official. “They’re increasingly coming to the conclusion that there’s more weakness in the UK than they thought. We originally forecast another £50 billion in February. They could easily bring that forward.”
US President Barack Obama said that the financial market turmoil will continue until European leaders persuade investors they have a convincing plan. As Europe dithers on a solution and the crisis darkens prospects for global growth, King warned there are limits to what central banks can do to stem its knock-on effects and said there is “no meaningful way” to quantify a worst-case scenario.
The current round of bond purchases through so-called quantitative easing is due to end in early February. Jamie Dannhauser, an economist at Lombard Street Research in London said a move before then is possible. Michael Saunders, chief European economist at Citigroup in London, also said
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