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UK warned it may need more QE

Thursday, February 07, 2013 - 02:23

Feb. 6 - The Bank of England should buy more bonds and the government's fiscal policy should be ''flexible'' if Britain's economy remains weak, the Organisation for Economic Co-operation and Development says. Ciara Sutton reports.

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Not out of the woods yet - that's the OECD's outlook for the UK. The Paris-based think-tank says the Bank of England should be on standby to pump more money into the UK economy. It forecasts that Britain's economy will grow just 0.9 percent this year after shrinking by 0.1 percent in 2012. OECD secretary general Angel Gurria, says more quantitative easing should be considered. (SOUNDBITE) (English) OECD SECRETARY GENERAL, ANGEL GURRIA, SAYING: "This is of course if growth fails to catch. Additional measures to improve the financing of the economy such as the funding for lending scheme are also welcome. But we cannot ignore the elephant in the room. The government deficit is still over 8 percent of GDP and it continues to be one of the largest in the OECD today." But the OECD's calls may fall on deaf ears at the Bank. It's already spent 375 billion pounds on government debt in a bid to get the economy moving. And several of its top policymakers have questioned the effectiveness of another round of QE. UK Chancellor George Osborne remains focussed on austerity. (SOUNDBITE) (English) UK CHANCELLOR, GEORGE OSBORNE, SAYING: "As we see through these difficult but necessary reforms, it's a vital part of our road to recovery and it enables the cost of borrowing to stay low." The UK has suffered two recessions in the last four years and could be on the verge of another. But Head of Equities at Hargreaves Lansdown, Richard Hunter, says things are headed in the right direction. (SOUNDBITE) (English) RICHARD HUNTER FROM HARGREAVES LANGSDOWN, SAYING: "In terms of austerity there are of course some that say that it hasn't even yet bitten and things are going to get much worse. On the other hand if you look at something like the FTSE 250, which is often seen as the best barometer for the UK economy. In 2012 that was up 22 percent. So without dismissing the fact that austerity is happening and will continue to happen, there are large pockets of the UK economy that are doing very well at the moment." The task of monitoring the economy will fall to new Bank of England boss Mark Carney from July. The OECD is still in favour of cutting the deficit but it warns the government may need to be flexible if growth proves hard to find.

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UK warned it may need more QE

Thursday, February 07, 2013 - 02:23

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