| NEW YORK
NEW YORK The head of the Bank of England warned on Monday that too many countries were trying to weaken their currencies to offset the impact of the slow global economy and the trend could grow next year.
"You can see, month by month, the addition to the number of countries who feel that active exchange rate management, always to push their exchange rate down, is growing," Mervyn King said in a speech.
"My concern is that in 2013, what we will see is the growth of actively managed exchange rates as an alternative to the use of domestic monetary policy," he told the Economic Club of New York. King did not identify any countries.
He also criticized what he said was backtracking by the Group of 20 leading economies to fix the imbalance between countries with trade surpluses and those with deficits, despite vows by the group to make rebalancing the world economy a priority after the financial crisis erupted.
Central banks, including the Bank of England, have kept interest rates very low and used unprecedented policies such as massive asset purchases to try to stir growth.
Pumping so much money into developed economies, however, can put upward pressure on currencies of emerging economies, hurting those countries' exports.
Brazil and China, as well as more economically developed Japan and Switzerland, have taken steps to push down the value of their respective currencies in recent years.
The BoE has so far bought 375 billion pounds ($603 billion) mostly in government bonds to help lift the British economy out of the doldrums.
Countries with trade surpluses are often reluctant to boost domestic spending that would allow deficit countries to rebalance by exporting more.
"This is a problem which has to be tackled," King said, citing a divide between some surplus and deficit countries within the euro zone.
The warnings by King, who is set to step down in July, echo those made in October by U.S. Federal Reserve Chairman Ben Bernanke, who delivered a blunt call for certain emerging economies to allow their currencies to rise.
The back and forth of monetary stimulus and foreign-exchange intervention has complicated any coordinated efforts to recover from the Great Recession.
"It is fair to say a recovery of a durable kind is proving elusive," King said in his speech.
Fielding questions later, he said he had "great confidence" that the United States will avoid the worst-case effects of the so-called fiscal cliff of automatic tax hikes and spending cuts due to come into force in January.
It "will find a way, if not avoiding going over the cliff, then hanging on by the finger tips" on the other side, he said.
Some political analysts predict the Republicans and Democrats will fail to agree on raising taxes and cutting spending before January 1 but might do so soon afterwards.
THE GOVERNOR'S WIFE
Britain recorded economic growth of 1.0 percent in the third quarter, marking an end to nine months of recession - its second since the 2008-09 financial crisis. But most of the rebound was driven by a technical bounce due to the London Olympics and extra public holidays in the preceding quarter.
The euro zone debt crisis, high inflation and fiscal austerity have weighed heavily on the economic recovery.
The address may be one of King's last in the United States. Mark Carney, currently the head of Canada's central bank, is set to be the first non-Briton to lead the BoE next summer.
King recalled the day his wife saw the surprising news that Carney was named to the post.
"She said, 'You know Mervyn, they'll miss you, or six months down the road they'll miss you,'" King told the audience.
"And then she looked at the TV screen and said: 'He's very young, he's very good looking, he's immensely charming and he's very charismatic.' I think he'll do a great job and they won't miss me at all."
($1 = 0.6221 British pound)
(Reporting by Jonathan Spicer and Edward Krudy; additional reporting by Steven C. Johnson, editing by Theodore d'Afflisio and David Gregorio)