The governor of the Bank of England said yesterday that Britain’s recovery from recession is fragile and that the next few months are likely to be volatile.
Governor Mervyn King told a parliamentary committee that recovery appeared to have stalled in the euro area, Britain’s largest export market.
“The tensions that underlay the build up of large world imbalances have not been resolved,” King told the House of Commons Treasury Committee.
“And, at home, bank lending to the non-financial sector continues to fall,” he said.
While the bank’s rate-setting Monetary Policy Committee expects a gradual recovery, King said, risks remain on the downside.
King said the bank’s £200 billion (US$310 billion) economic stimulus program of asset purchases, combined with a record low base rate, would provide a boost for some time.
The effect of the purchases is to increase the supply of money in the economy, a measure taken to counter steep downturns.
He said that Britain’s economy also benefited from a fall in the value of the pound in 2007 and 2008.
That makes British exports more competitive on price.
“Judging how these various factors will play out is an extremely difficult challenge,” King said.
In Tokyo yesterday, Japanese Finance Minister Naoto Kan put further pressure on the Bank of Japan (BOJ), telling it to do its part to fight deflation.
“The government will do its part, so I want the BOJ to do what it should do,” Kan told reporters.
“I have no wish to tell it to take specific actions. I am saying we should work together since we hold the shared understanding that we are yet to overcome deflation,” he said.
Kan, who became finance minister last month, has been advocating for the government and the central bank to aim for a positive annual inflation rate of about 1 percent to pull the nation out of the economic doldrums.
In November, the government said Japan was in deflation, citing falling consumer prices, but economists believe deflation had plagued the country for years.
The BOJ has already slashed interest rates to just 0.1 percent and pumped trillions of yen into the financial system to boost the economy.
But politicians have criticized it for not doing enough to ward off the threat of another deflationary spiral as seen after the country’s economic bubble burst in the early 1990s.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The New Taiwan dollar and Taiwanese stocks surged on signs that trade tensions between the world’s top two economies might start easing and as US tech earnings boosted the outlook of the nation’s semiconductor exports. The NT dollar strengthened as much as 3.8 percent versus the US dollar to 30.815, the biggest intraday gain since January 2011, closing at NT$31.064. The benchmark TAIEX jumped 2.73 percent to outperform the region’s equity gauges. Outlook for global trade improved after China said it is assessing possible trade talks with the US, providing a boost for the nation’s currency and shares. As the NT dollar
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