Wednesday, 15 February 2012

King on suffering savers

The Governor of the Bank of England, Sir Mervyn King, has denied that he's sending out a message that it's not worth saving, despite the fact that the Bank has kept interest rates at just 0.5%.

He said he had to make "a difficult judgement about the right course of action for the economy as a whole." And added that all groups of society were suffering from the consequences of the financial crisis.

Sir Mervyn argued that a decision to raise interest rates sharply to help pensioners and others depending on their savings would backfire.

"We could put up interest rates to 4 or 5 percent and then maybe the return on savings will appear to go up," he said.

"But I'm absolutely confident that if we were do that we would see the value of assets...go down, that there would be a sharp rise in the exchange rate, that investment and consumer spending would fall. We would go back into a recession."

Sir Mervyn was presenting the Bank's latest inflation report.

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