The Bank of England's new governor faces a "slow and protracted recovery" that may require the bank to make further purchases of government bonds, outgoing chief Mervyn King said on Tuesday.
British finance minister George Osborne announced the appointment of Canada's central bank head Mark Carney as the next governor of the BoE on Monday.
Continue Reading Below
"It may be unreasonable to expect anything other than a slow and protracted recovery, absent a further fall in the real exchange rate," King told parliament.
"In such an environment, there are limits to the ability of domestic policy to stimulate private sector demand as the economy adjusts to a new equilibrium," he said. "In the event that further easing is required, I believe it appropriate to continue with our policy of purchasing gilts."
He said the Bank of England should have ruled out the chance of a strong economic rebound for 2013 and 2014 earlier.
"I am completely confident with Mark Carney as someone with whom the Bank is in very good hands - as indeed is the role of governor which I am sure he will carry out with very great distinction," King said.
(Reporting by UK economics team; writing by Maria Golovnina; editing by Patrick Graham)