LONDON, Nov 20 - Following are highlights of Thursday's testimony to parliament's Treasury Select Committee by Bank of England Governor Mervyn King and other Monetary Policy Committee members on the MPC's latest Inflation Report: Nickell says U.S. recovery in the immediate past has benefited greatly from tax cuts so it is unlikely that U.S. growth in coming quarters will continue at that high pace. But he points to rising productivity and investment which "suggests a relatively high growth rate will be sustained in the U.S. for some time." "They could be disturbed by some financial crisis related to the huge current account surplus but my guess is that the most likely outcome is that the U.S. economy will continue to grow strongly for some time." King says it is too early to judge whether estimates of growth in the third quarter in the euro zone represent a real upturn. "One needs to be cautious as the numbers can be revised in either direction. But we do expect an upturn in the euro area. The survey evidence suggests this will be the case."
King says: "There does not seem to have been a trend increase in the number of households reporting debt increases." King says: "The negative equity situation is much better than it was in the early 1990s. But there are some families who are facing higher debt gearing so are more vulnerable." "Even if house prices fall, we won't see the same level of negative equity as in the early 1990s." "There has been a slowing of real wages for the first time in a long time...this is the first time in ages that real take-home pay has fallen in recent months. "Consumer spending has slowed but not as much as hoped. This may be because households have responded to low levels of rates...greater optimism about global growth." King says it is hard to judge what Britain's long-term trend growth rate is but suggests it may be around 2.5 percent a year. King says inflationary pressures are likely to build gradually over the next two years. King says the overall outlook for growth and inflation are slightly stronger than in August which was a key reason for the rise in interest rates earlier this month. King says consumer spending has declerated markedly but neither it nor house prices had slowed as much as the MPC had expected. But, he says, the MPC is aware of the risks from high levels of household debt to the outlook for consumer spending. King says: "In most of the industrialised world, demand and output are, as expected, responding to the exceptionally supportive stance of monetary and fiscal policy in recent years. In the UK, estimates of demand and output have been revised up, and some of the statistical fog has dissipated. Following a weak first quarter, output has grown at around its historical average, and inflation has now been above the 2.5 percent target for almost a year." "Consumer spending has decelerated markedly to growth rates averaging just over half a percent a quarter for the past year from around one percent a quarter over the previous five years. But neither consumer spending nor the housing market has slowed as much as the Committee expected."//