LONDON (AFX) - Bank of England deputy governor Mervyn King has not ruled out an interest rate cut at the end of the next meeting of the bank's monetary policy committee on June 6, the day before the general election.
Speaking at a news conference for the banks release of its quarterly inflation report, King said it would be wrong to conclude that the MPC would not make a pre-election rate cut. "We haven't decided what we would do," he said. "We will make what ever decision is necessary to keep inflation on track to meet the target," he said.
Economists are predicting that the MPC will wait until after the election to make what would be its fourth rate cut this year. But King said the MPC would "continue to be alert" on monetary policy.
He rejected suggestions that MPC had not eased monetary policies enough, leaving UK rates higher than those in the U.S. and the euro zone.
He declined to answer a question on the European Central Bank's credibility following last week's controversial rate cuts that flew in the face of its prior signals.
On the UK economy, King said there was "enormous uncertainty over the likely impact of the foot-and-mouth crisis on gross domestic products".
He said the bank was predicting the outbreak would shave less than 0.2 pct of GDP in the first half of this year "but there is enormous uncertainty that only the data will tell."
He pointed to indications that the tight UK labour market "is reaching a turning point."
He said this mornings average earnings figures reversed the sharp rise registered in February.
On the U.S., he said it was still to early to be sure how prolonged and how deep the downturn would be.
The key factor determining the future path of productivity growth would be the behaviour of consumption, which had held up so far, he said.