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The group that decides the interest rate deliberately fuelled a consumer boom to boost house prices and personal debt so that “UK Plc” could avoid recession.
Former governor Edward George said the Monetary Policy Committee “did not have much of a choice” in the matter.
The MPC members were battling to use interest rates to prevent the UK being dragged into a worldwide economic slump, he explained.
And, he said, his legacy to the MPC - which decides the rate - was to “sort out” the problems that policy had caused.
Lord George - who headed the Bank for a decade until June 2003 - revealed that he knew the approach was not sustainable as he gave evidence to a committee of MPs.
The terrorist attacks on the US in September 2001 caused a stock market crash in the US, and a sharp fall in the global markets.
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