Bank of England's inflation report news conference

LONDON (Reuters) - British inflation is likely to be significantly higher over the next 18 months than expected in August, Bank of England forecasts showed on Wednesday, posing a barrier to further policy stimulus.

Following are comments from the Bank of England's news conference with governor Mervyn King:

KING ON WORLD ECONOMY

"Not just the UK but the world economy is having to ... a new real equilibrium, to use the economists' jargon.

"The countries that were borrowing a lot abroad will have to reduce the scale of that borrowing and reduce those deficits, and countries with large trade surpluses will have to one way or another redress the balance of their economy to rely less on export surpluses.

"It's proving extremely difficult to bring about that adjustment to a real equilibrium and in that process the world economy is growing more slowly and so any deficit country like ours which is trying to make that adjustment is confronted with a major difficulty of rebalancing at a time when global demand is very weak.

"I suspect that the only economy in the world with a deficit that is capable of ignoring these pressures in a way is the United States and even there clearly there are concerns about the effects of debt positions, but any other economy I think has to make that adjustment to equilibrium and we will too."

KING ON QE'S EFFECTIVENESS

"What everyone I think believes on the (Monetary Policy) Committee is that the circumstances in which you carry out the asset purchases do make a difference to its effectiveness."

KING ON GILT PAYMENTS TO TREASURY

"To be honest, I think there is a lot of fuss about nothing with this scheme, I don't think it affects anything very much. It doesn't affect the public finances to any significant extent, it's just a question of the timing of the cash flows."

KING ON FISCAL MULTIPLIERS

"You can explain the difference between our central projection that we believed in back in 2010 and the outturns, in terms of the much greater squeeze on real incomes and hence weaker consumer spending and the impact of the euro area crisis on both exports, and also the effect of uncertainty on bank funding costs and hence investment, so I don't think fiscal multipliers are the answer to the question of why growth has been weak."

KING ON PROJECTIONS

"We feel that the persistence of the weakness of the world environment has been such that we attach much less weight to those very rapid growth outcomes, we don't attach any greater weight to those weaker outcomes. I think that's just a realistic reflection of where the world economy is going.

"In the broad outlook of the projections, they're not enormous changes that we've made today."

KING ON EURO ZONE PROSPECTS

"The world economy is growing slowly. We face a difficult challenge in our biggest export market, the euro area plus the countries around it account for one half of our trade.

"The prospects there look pretty bleak. This is a very difficult environment in which the UK economy is trying to rebalance."

KING ON GILT COUPONS

"There is now a clear arrangement in place under which the coupons will be transferred to the Treasury. That is equivalent indeed to asset purchases of that amount. But we know what that amount is and we can offset it in our decision.

"Knowing that this was going to be the case was one of the factors that fed into the (Monetary Policy) Committee's decision not to extend the asset purchase programme last week."

KING ON INFLATION AND SLOW RECOVERY

"We face the rather unappealing combination of a subdued recovery with inflation remaining above target for a while."

KING ON ASSET PURCHASES

"If that unfavourable world environment persists, and there's little sign of any change to underlying problems in the euro area, it may be unreasonable to expect anything other than a slow and protracted recovery absent a further fall in the real exchange rate.

"In such an environment, there are limits to the ability of domestic policy to stimulate private sector demand as the economy adjusts to a new equilibrium. But the (Monetary Policy) Committee has not lost faith in asset purchases as a policy instrument nor has it concluded that there will be no more purchases."

KING ON GLOBAL IMBALANCES

"The international imbalances which played such a pivotal role in the run up to the crisis still remain.

"The pattern of surplus countries reluctant to expand domestic demand to protect their trade position and deficit countries restraining domestic spending to reduce their debt ratios is only too familiar.

"It is a recipe for weak global growth."

KING ON FOURTH QUARTER OUTPUT

"Just as growth in Q2 was depressed by one-off factors and gave a misleadingly weak picture of the economy, so growth in Q3 has been boosted by one-off factors and gives an overly optimistic impression of the underlying trend.

"Continuing the recent zig-zag pattern, output growth is likely to fall back sharply in Q4 as the boost from the Olympics in the summer is reversed. Indeed, output may shrink a little this quarter."

(Reporting by Li-mei Hoang, Peter Schwartzstein, Isla Binnie, Alessandra Prentice and Peter Griffiths; editing by Matt Falloon.)

Source: http://news.yahoo.com/bank-englands-inflation-report-news-conference-104937429--business.html

los angeles dodgers christie brinkley seattle mariners geraldo rivera supreme court health care joe oliver joba chamberlain