When King took over, GDP was growing at 3% and inflation was just 1.3%. He made the decision to cut interest rates to a post-war low of 3.5%. When the crunch first took hold, King insisted it was not about to become an international crisis. In the first weeks of the crunch he refused to follow the example set by the US Federal Reserve and buy “toxic” mortgage-backed securities from ailing banks hit by the credit crunch and in October 2009 insisted that “moral hazard” meant that some banks should not be bailed out. The Treasury select committee has said King should have been “more pro-active”.
There have also been suggestions that the Bank’s monetary policy committee (MPC) should have realised there was a housing bubble developing and taken action to damp it down and, more recently, the committee should have seen the recession coming and cut interest rates far faster than it did.