Central bankers tend to be a rather tight-lipped bunch so when they do speak anyone with an interest in the economy sits up and listens. This evening the governor of the Bank of England, Sir Mervyn King, gave an extended interview to my ITN colleagues over at Channel 4 news.
He had some interesting thoughts on the health of the British economy for a start. We’re in a double-dip recession at the moment but he said he expected this to end in the current quarter with a return to growth – albeit a slow recovery.
Our fate rests with the eurozone and the wider world economy, he said, and there are worrying signs of a slowdown in countries which had seemed to be steaming ahead, like China and Brazil. Reaching for one of his favourite weather metaphors, Sir Mervyn said these represent “black clouds” hanging over business confidence here in the UK.
But acknowledging the slowdown led the Governor then into political territory when he explained that slow global economic growth was an acceptable excuse for the British government to abandon targets on national debt.
You may remember that the Chancellor, George Osborne, promised soon after taking office to ensure national debt was falling as a proportion of GDP (the economy) by 2015. Weak growth since then as well as the difficulty of finding savings in the austerity drive means that many economists already think the Chancellor will have to admit he’s going to miss the target in a couple of months.
The Governor’s words are as good as a stamp of approval for this step.
Whether that means the Chancellor uses the political space to ease back on cuts is another matter altogether.