Sir Mervyn King was speaking after the decision by the Bank’s Monetary Policy Committee to put £75billion of newly created money into the economy in a desperate effort to stave off a new credit crisis and a UK recession.
Economists said the Bank’s decision to resume its quantitative easing [QE], or asset purchase programme, showed it was increasingly fearful for the economy, and predicted more such moves ahead.
Sir Mervyn said the Bank had been driven by growing signs of a global economic disaster.
“This is the most serious financial crisis we’ve seen, at least since the 1930s, if not ever. We’re having to deal with very unusual circumstances, but to act calmly to this and to do the right thing.”
Announcing its decision, the Bank said that the eurozone debt crisis was creating “severe strains in bank funding markets and financial markets”.
The Monetary Policy Committee [MPC] also said that the inflation-driven “squeeze on households’ real incomes” and the Government’s programme of spending cuts will “continue to weigh on domestic spending” for some time to come.
The “deterioration in the outlook” meant more QE was justified, the Bank said.
Financial experts said the committee’s actions would be a “Titanic” disaster for pensioners, savers and workers approaching retirement. Sir Mervyn suggested that was a price worth paying to save the economy from recession.