BOE Adds 50 Billion Pounds to Stimulus on Euro ‘Concerns’

Bank of England officials pumped another 50 billion pounds ($79 billion) into the U.K. economy to protect a nascent recovery from the threat posed by Europe’s debt crisis. The nine-member Monetary Policy Committee raised the target forbond purchases to 325 billion pounds, more than a quarter of current outstanding gilts, according to a statement in London today. The increase was forecast by 34 of 50 economists in a Bloomberg News survey. Fifteen economists forecast a 75 billion- pound increase and one no change. The MPC also held its benchmark interest rate at a record-low 0.5 percent. The stimulus expansion suggests policy makers remain concerned that Europe’s failure to stem its debt turmoil poses a risk to Britain and may pull inflation below their 2 percent goal. While they noted an improvement in some business surveys last month, they said the growth outlook remains weak and that they had “concerns” about debt in some euro-area nations.

“They’re worried about risks to growth and they remain confident that inflation will fall below their target,” said Philip Rush, an economist at Nomura International Plc in London. “They need to explain why they’re still easing when the general environment seems to have improved so much.” “Some recent business surveys have painted a more positive picture and asset prices have risen,” the central bank said. “But the pace of expansion in the U.K.’s main export markets has also slowed and concerns remain about the indebtedness and competitiveness of some euro-area countries.” “We could be nearing the end in terms of quantitative easing,” Peter Dixon, an economist at Commerzbank AG in London, said in a telephone interview. “Markets, at least for the moment, are stabilizing, and if the uncertainty which prevailed in the fourth quarter continues to lift, then I think the case for additional QE becomes more difficult. But to a large extent, it all hinges on theeuro zone.”

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