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King’s speech warns against rate rises

The Governor of the Bank of England yesterday warned of the fallout that a rise in long-term interest rates could create.

Addressing the European Parliament in Brussels, Mervyn King said that a rise in long-term interest rates would have “severe” consequences.

His comments come ahead of this week’s Bank of England’s Monetary Policy Committee (MPC) and could be a sign that the MPC will leave UK interest rates unchanged at a record low of 0.5pc.

“The economic consequences of high-level indebtedness now would become more severe if rates were to rise,” Mr King said. “It is the main reason why interest rates are so low.”

He added it would take a number of years to repair the damage across Europe caused by the financial crisis.

“The economic challenges will last for many years…The financial crisis is far from over,” he said in his capacity as deputy chair of the European Systemic Risk Board (ESRB).

This was posted in Bdaily's Members' News section by Ruth Mitchell .