13 May 2010

Bank of England chief hails UK deficit plan

1:11 pm on 13 May 2010

The Bank of England has endorsed the deficit reduction plan set out by the new coalition government, calling it strong and powerful.

The central bank's governor, Mervyn King, normally refuses to comment on Government policy at his quarterly inflation media conferences.

However Mr King has said plans for spending cuts worth Stg 6 billion this year are sensible as the financial crisis is far from over.

"I am very pleased that there is a very clear and binding commitment to to accelerate the reduction in the deficit over the lifetime of the parliament, and to introduce additional measures this fiscal year to demonstrate the importance of getting to grips with that, before running the risk of an adverse market reaction."

Investors have given a cautious welcome to the new government - with UK bond prices rising, although sterling weakened.