video transcript

Governor Mervyn King batted back criticism of the decision to transfer back to the government the interest paid by the government on the bonds the BoE bought as part of its stimulus programme. The move had raised questions about the Bank's independence. But it was the economy that was King's main thrust as he presented the central bank's latest inflation and growth forecasts. The Inflation Report, meanwhile, showed that inflation was likely to be significantly higher over the next 18 months than expected in August, posing a barrier to further policy stimulus. King said that the outlook for inflation was the main reason why the policymakers decided to stop the purchases of gilts in November. He reiterated that there were limits to what monetary policy could do to boost an economy undergoing far-reaching adjustments after the financial crisis amid severe headwinds from the euro zone debt crisis.