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BoE could print Stg50bn in new QE

Thursday, October 11 16:04:02

A lukewarm recovery from recession and falling inflation will spur the Bank of England to top up its asset-buying programme with another 50 billion pounds next month, a Reuters poll showed today.

The economy, meanwhile, probably bounced back to growth of 0.6 percent last quarter, supported by better weather, extra working days and the London Olympic Games, the poll of more thank 70 economists taken in the past week predicted.

But it will only expand between 0.2 and 0.4 percent in the following four quarters, according to forecasts unchanged from a poll taken last month.

"Indicators suggest the economy is barely achieving some growth, which means the BoE will probably have to downgrade its growth forecast again - and continue to add to stimulus with more QE in November," said Azad Zangana at Schroders.

Britain fell back into its second recession in four years at the turn of the year as tough government austerity measures and the euro zone debt crisis stifled the economy.

Gross domestic product contracted for a third quarter between April and June, by 0.4 percent, depressed by one-off factors including unusually wet weather and an extra public holiday to mark Queen Elizabeth's 60 years on the throne.

The International Monetary Fund cut its economic forecasts for Britain on Monday and said more BoE stimulus - and possibly higher public spending or tax cuts - may be needed if the outlook darkens.

The IMF forecast Britain's economy would shrink 0.4 percent this year, before growing by a 1.1 percent in 2013, down sharply from its July forecasts of 0.2 percent growth in 2012 and 1.4 percent growth the year after.

Britain's GDP will end the current year 0.3 percent smaller than how it started, the Reuters poll said, knocked by a downturn in the euro zone - its biggest export market - but agreed with the IMF's 2013 prediction.