–Fund: BOE Could Boost Unconventional Policy If Risks Emerge
–IMF: Preferable New BOE Steps Should Ease SME, Household Credit
–Follows Fund Move To Revise Up 2012 UK Growth To 0.8%

LONDON (MNI) – The Bank of England still has scope to ease
monetary policy via unconventional means, the International Monetary
Fund says in its latest World Economic Outlook.

“In the United Kingdom, with inflation expected to fall below the 2
percent target amid weaker growth and commodity prices, the Bank of
England can further ease its monetary policy stance,” the Fund states
in its latest World Economic Outlook.

The comments follow the Fund’s move to revise up its 2012 UK growth
forecast to 0.8% while its 2013 forecast was left unchanged from January
at 2.0%.

The IMF says that further unconventional easing of policy should
‘preferably’ be done in a way which eases credit conditions for
households and small business.

“Policy rates in Japan, the United Kingdom, and the United States
are already close to or at the lower bound. Should downside risks to the
growth outlook threaten to materialize, their central banks could step
up their unconventional policies, preferably in a way that eases credit
conditions for small and medium-size firms and households”.

The IMF notes that the UK, among other advanced economies suffered
some tightening of credit conditions due to the fallout from widening
peripheral euro zone sovereign bond spreads in the latter half of 2011.

The comments from the Fund are not totally uncontroversial. The
Monetary Policy Committee of the BOE split in March, with two of its
members pushing for a further stg25bn of asset purchases. Others on the
committee seem more concerned than others that inflation may not decline
to its target as rapidly as the Bank’s last forecast in February
implied.

Still, recent data have suggested only a feeble recovery at best
and the new market turmoil in the euro zone could force the BOE’s hand.

The IMF’s call for any policy action to be done in a way which
helps small businesses and households may fail to win backing from the
MPC. While some members of the MPC, like Adam Posen, have backed
diversifying asset purchases away from gilts to help small firms, the
BOE leadership has so far been opposed to buying any assets other than
gilts.

For further information contact David Thomas on 4420 7862 7492
or email: dthomas@marketnews.com.

[TOPICS: M$$BE$]