Bank's Fisher says more QE may be needed - paper - Reuters UK

LONDON | Sun Nov 27, 2011 1:57am GMT

LONDON (Reuters) - Bank of England policymaker Paul Fisher said the central bank's latest 75 billion pound cash injection into the economy was the minimum it needed to do and he thought it may need to add to it.

"I still think we might need to do some more," Fisher, the central bank's executive director for markets, told the Sunday Times newspaper in an interview.

Most economists say the Bank will pump a further 50 billion pounds into the economy in February when the current programme of purchases of government debt, announced in October, comes to a close.

The central bank sharply downgraded its expectations for growth and inflation for 2012 in its latest projections this month, signalling it may further expand its 275 billion pound asset purchase programme.

Fisher said he had supported the October decision to restart quantitative easing because he had been concerned about the worsening state of the economy since a marked slowdown at the end of 2010.

"I was trying to keep it on the table throughout the year because I was conscious of this deteriorating picture," he said.

"For me it was a timing thing. I voted for 75 billion pounds because I thought it was the smallest amount I was absolutely sure we needed to do."

For the moment the Bank's policymakers see no case for increasing monetary stimulus before February, according to minutes of their November 9-10 rate setting meeting, despite a rising chance of a worst-case outcome for the euro zone crisis.

But looking ahead, the minutes said they were split on the likelihood of a further increase when its asset purchases were completed by the time of February's meeting.

Fellow Bank policymaker Martin Weale last week said he backed further quantitative easing in February unless the economy improved.

Fisher indicated that he saw a limit to the potential size of the asset purchase programme.

"We're buying at the right sort of rate the market can supply," he said. "Suppose we went to the extreme and doubled to 400 billion pounds. If we had done that and it still wasn't working, I think we would want to stop and try something else."

He backed chancellor George Osborne's deficit-cutting austerity programme, which has ensured the confidence of international markets during the euro zone crisis but bars the government from boosting the economy with additional spending.

"It is important ... that we are seen to have a grip on our domestic fiscal position," Fisher said. "It is important that we have a fiscal consolidation programme that convinces the markets."

But he said global economic conditions were serious and the outlook was unclear.

"It is more uncertain than at any time I can remember in terms of what is going to happen and how the world is going to look," he said.

For Britain's economy, he added, "things aren't falling off a cliff - it is quite evenly balanced - but we are quite vulnerable to a shock."

(Reporting by Tim Castle)