Oct. 5 (Bloomberg) -- The Bank of England should consider easing monetary policy if the outlook for the economy deteriorates further, the International Monetary Fund said.
“In the U.K., where the recovery is tepid, and fiscal tightening stronger, the accommodative stance will need to be maintained for some time,” the Washington-based fund said in an e-mailed report today. “The Bank of England should further loosen its monetary stance if the recent weakening of the growth and inflation outlook continues.”
The IMF cut its 2011 and 2012 U.K. growth forecasts last month as threats from Europe’s sovereign-debt crisis weigh on the economy. Growth will be “sluggish” this year as “serious headwinds,” including the largest government budget cuts since World War II and a squeeze on household incomes, undermine demand, the fund said today.
The deteriorating outlook prompted most Bank of England policy makers to say last month that more stimulus for the economy is “increasingly probable.” Nine of 30 economists in a Bloomberg News survey say the central bank will resume its emergency bond-purchase program tomorrow. The rest say it will hold the plan at 200 billion pounds ($308 billion).
All 53 economists in a separate survey see no change in the key interest rate, which is at a record low of 0.5 percent. The announcements will be made at noon in London tomorrow.
--Editors: Fergal O’Brien, Kevin Costelloe
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