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The BBC's Jonty Bloom
"The stock market here follows the US economy like a shadow"
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Friday, 29 December, 2000, 08:04 GMT
US slowdown to affect UK economy
Sir Edward George, governor of the Bank of England
Sir Edward peers at a slowing US economy
The governor of the Bank of England, Sir Edward George, has warned that the United Kingdom is likely to be affected by the economic slowdown in the United States.

The US slowdown ... might be sharper than we needed ... and I think is one of the big uncertainties affecting the UK economy as a result

Sir Edward George
Speaking on BBC Radio 4's Today programme, Sir Edward said a slowdown was to be expected after a long period of "stable growth ... and reasonable price stability".

He said the current data did not suggest anything "deeply damaging to our situation" and that it was "too soon to become seriously concerned", but warned the "biggest cloud on the horizon" would be "a sharper slowdown in the United States than we expect".

"We will see slower growth than we expected", Sir Edward said, "but it's not a nightmare scenario".

We have seen stable growth now for quite a long period, we've seen employment rising, unemployment coming down and we've seen that accompanied by reasonable price stability

Sir Edward George
For the UK he predicted lower economic growth, but a "sustainable rate of growth".

However, Sir Edward declined to discuss the likely impact on UK interest rates. While refusing to rule out higher interest rates, he said he could not "predict lower interest rates" either.

The bank would have to "monitor the data as they come in".

Euro recovery welcome

One of the biggest worries, though, was an "imbalance" in the UK economy, he said, where some sectors were deeply affected by the strength of the pound against the euro.

Sir Edward said the current recovery of the euro was "extremely welcome", but argued that the single currency was still too weak to make it possible for the UK to join Europe's monetary union.

He repeated his long-standing position that joining the euro was ultimately a "political decision", not an economic one.

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See also:

29 Dec 00 | Business
Fears over manufacturing jobs
28 Dec 00 | Business
US confidence at year low
28 Dec 00 | Business
Britain's battered blue chips
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