Bank of England faces MP questioning

The Governor of the Bank of England will face questions from MPs today amid increasing concern about economic difficulties in the UK.

Mervyn King will appear before the Commons Treasury Committee to discuss this month’s inflation report.

The Bank signalled two rate cuts were on the way in 2008 as the economy faces a squeeze from higher inflation and slowing growth.

However, it said that inflation would meet its 2% target if borrowing costs fell by 0.5% from its current 5.75%, although the Governor warned that there was a “less benign” environment now.

There are pressures from soaring food costs, higher oil prices and a weaker pound.

Today’s session also follows the summer’s credit crunch, which led to the crisis at Northern Rock, a downturn in the housing market and falling consumer spending after a series of interest rate increases.

Mr King has previously faced hostile questioning from the committee over the state of the economy and the run on Northern Rock.

There are growing concerns about the fate of more than £20bn of taxpayers’ used by the Bank to bail out the troubled mortgage lender when it ran into trouble over the summer.

Mr King is also facing questions about his future as Governor, with speculation that his five-year term will not be renewed by the Government when it ends next June.