U.S. News

Bank of England's King Says Rates Could Rise if Asia Stops Saving


Long-term interest rates could rise and asset prices fall if savings from Asia -- which have been pouring into financial markets -- start to reverse, Bank of England Governor Mervyn King said in a newspaper interview.

Interest Rate Outlook
Interest Rate Outlook

"Savings from Asia are coming into financial markets, bidding down interest rates, and that's bidding up asset prices," King told the Western Mail.

"Now if that process were to go into reverse, and people in Asia started to save less, then I think you would see a rise in long-term real interest rates and that would have an effect on asset prices as a whole."

King said Britain's housing market was not immune to influences from the world economy.

"That's the biggest source of uncertainty, I think," he added.

On Monday, King told a business audience in Wales that interest rates may need to rise again if indicators of capacity pressures, pricing intentions and inflation expectations remain elevated.