— Adds Detail, Background To Version Transmitted At 1429BST

LONDON (MNI) – The risk of recession has increased since July, Bank
of England Monetary Policy Committee Martin Weale has said in an
interview with Reuters.

Weale added that growth prospects had even worsened in the last few
weeks, according to Reuters.

The MPC member – who was voting for a rate hike as recently as July
– said he would even back more stimulus now if CPI inflation were to be
forecast undershooting the 2% target substantially.

The August Inflation Report showed inflation at 1.7% in 2 years
time. Given the deterioration of the growth outlook no doubt the BOE
is already looking at an even lower estimate than that.

Weale told Reuters that he was confident that QE would work if the
MPC were to deploy it. In a recent speech he said that any further QE
should be targeted at the long end of the Gilt market.

On Tuesday MPC member Adam Posen has said that the BOE should
attack the longer-end of the gilt yield curve with an additional round
of stg50bln of asset purchases to be made over the next three months.

In a speech in Gloucestershire, Posen said that with the global
economic outlook worsening, the bank should “arguably” make even more
asset purchases, perhaps of around between Stg75 or 100bln.

The Bank of England Monetary Policy Committee produced no surprises
at its September meeting, leaving Bank Rate on hold at 0.5% and issuing
no policy statement.

But many analysts believe the MPC is edging closer to further asset
purchases as euro zone tensions become yet more acute and the latest
batch of domestic economic data give shape to the downside risks
delineated in its last set of minutes.

A Market News survey conducted prior to the meeting found a growing
number of analysts expecting that the BOE will – at some stage –
undertake further asset purchases, with 40% now expecting BOE QE2 as
against 27.5% in the August survey.

In its August minutes, the MPC focused on the risks posed primarily
by the euro zone debt crisis as well as those which might emerge if
there was to be a “significant further intensification of concerns”.

–London newsroom: 4420 7 862 7492; email:
dthomas@marketnews.com/wwilkes@marketnews.com

[TOPICS: M$B$$$,M$$BE$]