King warns of slow recovery – FT.com
By Chris Giles and Norma CohenPublished: May 13 2009
The Bank of England warned yesterday that the “green shoots” now visible in the economy could wither as private sector banks might not have sufficient lending capacity to fuel the recovery.
Disregarding most of the optimism in financial markets and business surveys, Mervyn King, Bank governor, judged that both the short-term and the longer-term outlook for growth had deteriorated since February. The future was highly uncertain, he said.
The Bank’s new forecast in its quarterly inflation report suggests that a W-shaped recession – a rebound as mothballed factories reopened, followed by another downturn next year – is a distinct possibility. “The risks are weighted towards a relatively slow and protracted recovery,” Mr King said.
The governor said that banks would limit their lending because they could not afford losses that might result in their eventual nationalisation. “If the banks are going to continue as private sector entities they will naturally behave in a risk averse way for a while,” Mr King said.
FT.com / UK – King warns of slow recovery.
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