UK economy in deep recession

UK Economy

The head of the Bank of England Mervyn King, speaking to reporters today did not deny the obvious and literal at once - after greeting - moved to the bad news. However, Mervyn King, acknowledged the need to mitigate further easing of monetary policy and reducing rates. The Bank of England stands ready to increase the offer of money in the economy and stimulate lending to the real economy.

Nothing new, Mr. King did not say. A recession in Britain say a long time, but the head of the Central Bank launched the country where the pessimistic forecast of government payments on the duration of a recession. Mervyn King seems to have decided that now is not the time for vain hopes and acknowledged - the decline in the economy will be quite long: "Monetary, fiscal and financial policies are changing rapidly in terms of recession. But the duration and depth of the recession will depend to a significant degree of developments in the rest of the world where the economic downturn only worsens. As in the UK and the magnitude of the decline in the world is determined by two factors - the further deterioration in credit sector after the collapse of the international banking system, and the collapse of confidence, which leads to a drop in spending and production. Recovering This confidence will not be easy and will take time. "

The drop in UK GDP by mid-2009 could range from 4% to 6% compared to 2008, predicts Bank of England. The United Kingdom economy has officially entered the recession period, showing negative momentum of GDP in the third and fourth quarters of 2008. On the GDP growth is not expected until 2010. Managing Director of Arbat - Capital Management Alexander Orlov believes that in general the real prediction: "In England, I think the recession will be shorter than in continental Europe, after the pound dropped to 10-15 percent, it makes sense to buy the pound against the euro . first entered recession in the United States, then British, then Continental Europe and will go in the same way. The Bank of England stands ready to increase the money supply so as to quantitative easing - that the Fed is already practicing. "

According to the Central Bank of UK inflation in the country by the end of the biennium may be below the current strip targeting at 2%. Now the figure is annualized 3.1% and will fall. And that, according to chief economist at IFC Opening Danila Levchenko, a negative factor because of the economic threat of deflation. Here's what he told Business FM: "Inflation in the UK in the period from September to December fell heavily, the peak was in September, to the person a clear and rapid decline in inflation. Of course inflation has fallen, too, because of falling energy prices, as well as because of the British Government's decision to reduce the VAT rate from 17.5 to 15 percent. So I think that inflation will soon fall below 2 percent, it is quite likely. "

As predicted by experts, Mervyn King, confirmed the intention to further reduce the discount rate - to 75 hundredths per cent by the middle of this year. This should give the money economy and encourage lending. Plus, soon to be implemented on buy-back program of problem assets from banks.