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Mervyn King issues downbeat statement on UK economy

Even though today's statement from Mervyn King was effectively leaked to the press some time ago, the inflation report from the Bank of England monetary policy committee pours cold water on hopes of a short term recovery in the UK economy. In an admission that the recession has been deeper than previously estimated, Mervyn King believes that the recovery process will be more prolonged than first thought, an admission which will shock some people. In his words, "we will still, I think, find ourselves in a difficult position for a long time to come".

This is a damning indictment of the UK economy and will cause serious repercussions within the UK government as we approach the next general election. Like so many other "experts" in the field of economics, the Bank of England has flip-flopped between positive and negative reports on the UK economy while ultimately it appears that the recession has been deeper than first thought, and will take longer to recover from.

The currency markets showed little reaction to the report primarily because the information had been leaked beforehand and the £50 billion increase in the quantitative easing program just last week had already seen sterling come under significant pressure.

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