Bank of England Governor Sir Mervyn King to be grilled by MPs on UK economy

Sir Mervyn's appearance before the House of Commons Treasury comes a day after the International Monetary Fund slashed its UK growth forecast to just 0.2pc for 2012 and 1.4pc for 2013 and less than a week after the announcement of an emergency £80bn "funding for lending" scheme designed to ward off a credit squeeze.

He is also likely to face further questions about his handling of the Libor rate-fixing scandal, after it emerged that the then president of the US Federal Reserve Tim Geithner raised concerns with him about the index as long ago as 2008.

A former member of the Bank's Monetary Policy Committee has called for Sir Mervyn to be removed before his term comes to an end in June 2013.

David Blanchflower, who served on the MPC from 2006 to 2009, told the Huffington Post: "People told him about the Libor issue and he just wasn't interested. He didn't share any of the information with the rest of us on the Monetary Policy Committee."

Sir Mervyn will appear before the committee alongside deputy Paul Tucker, who is widely tipped to succeed him next year if he emerges from investigations into the Libor scandal with his reputation unscathed.

Giving evidence to the same committee last week, Mr Tucker "absolutely" rejected suggestions that government ministers or Bank officials had leant on Barclays to manipulate the Libor rate to reduce risks at the height of the banking crisis in 2008.

On Monday, a senior banking regulator told the cross-party Treasury Committee that Barclays had a "culture of gaming" and its problems came from "the tone at the top" set by former boss Bob Diamond.

Andrew Bailey, head of the Prudential Business Unit at the Financial Services Authority (FSA), said that Mr Diamond's account of his and the bank's relationship with regulators was "highly selective".

Earlier, former Barclays chief operating officer Jerry del Missier confirmed he had told the bank's money market desk to lower Libor submissions in October 2008 because he believed the Bank of England had directly instructed the bank to do so.

Today's evidence session is set to focus on the Bank of England's efforts to encourage banks to step up lending to small businesses, which are currently finding it difficult to secure credit.

In last month's Financial Stability Report, the Bank urged City regulators to tell banks they can tap into an estimated £500bn held on their balance sheets to help buoy the ailing UK economy and fend off a credit squeeze.

And this was followed last week by Chancellor George Osborne's launch of the "funding for lending" scheme with the aim of freeing up the logjam in credit by offering banks cheap finance on the condition they pass it on to borrowers.

Mr Blanchflower said that Sir Mervyn had been slow to respond to the financial crisis and the Government should now consider replacing him early: "Announce it next week so that Mervyn has less power going forward. It's time to sweep clean the top levels of the Bank of England."

He added: "King didn't spot the Great Recession until October 2008. He was obsessed with inflation and missed everything: the crash, the recession, the Libor scandal."

Meanwhile, Federal Reserve chairman Ben Bernanke will gives his bi-annual report before the Senate Banking Committee today.