Newspaper article The Evening Standard (London, England)

Bank May Return to Pumping in More Money

Newspaper article The Evening Standard (London, England)

Bank May Return to Pumping in More Money

Article excerpt

Byline: Hugo Duncan

BANK of England Governor Mervyn King today said it was "far too soon" to declare it has stopped printing money for good.

He said the monetary policy committee was ready to pump even more money into the economy if the recovery falters and inflation falls back below the 2% target.

The comments, at the Bank's latest inflation report, followed last week's decision to halt the unprecedented programme of quantitative easing which has seen [pounds sterling]200 billion injected into the ailing economy through buying assets such as gilts and bonds.

King said: "Although the MPC last week announced a pause in its programme of asset purchases, it is far too soon to conclude that no more purchases will be needed. So the committee will keep its options open, and further purchases will be made if they prove necessary to keep inflation on track to meet the target in the medium term."

It came as the Governor warned the UK could plunge back into recession this year after recovering from the longest slump since the Second World War.

The Bank downgraded its economic forecasts and raised its inflation outlook for the year after growth of just 0.1% in the fourth quarter of 2009 and inflation hit 2.9% in December.

It forecast gross domestic product to grow by around 3% by the end of this year, far lower than the 4% forecast at the last report in November.

The Bank said inflation will spike at around 3.5% early this year before falling back below the 2% target.

Jonathan Loynes of Capital Economics said: "The report looks distinctly dovish and will raise questions over why the MPC did not extend quantitative easing further last week.

"Not only has the outlook for GDP growth been revised down, but inflation is expected to be below its 2% target for most of the forecast period.

"The clear message is that further policy support may yet be needed, whether that is more QE or other forms of support. …

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