–Sounds Grim Note, Says UK Economy Remains Vulnerable
–Says Osborne Should Stick With Consolidation Programme
–Says QE Going At Right Kind Of Pace

LONDON (MNI) – Bank of England Executive Director for Markets Paul
Fisher said he is ready to support further quantitative easing, the
Sunday Times reported, following an interview with the official.

“I still think we might need to do some more. I don’t have to
decide that now,” Fisher, a principal architect and promoter of the
first phase of QE in 2009 to 2010, told the paper.

The comment is in line with market expectations, with most analysts
anticipating a further tranche of QE to be announced in February,
especially following the BOE’s inflation and growth projections
published in mid-November, which showed flat growth for the next few
quarters and inflation well below the 2% target two and three years out.

But Fisher indicated that there was a limit on the size and pace of
the Gilt purchases: “We’re buying at the right sort of rate the market
can supply.”

The comments follows remarks made by other Monetary Policy
Committee officials that the present stg75 billion programme of gilt
purchases — which is scheduled to be completed by February — marks a
kind of speed limit. It has been striking that cover ratios at some of
the reverse auctions have been relatively tight.

“Suppose we went to the extreme and doubled to stg400bn and it
still wasn’t working, I think we would want to stop and try something
else,” said Fisher.

He also indicated that the stg75bn QE extension agreed by the
BOE MPC in October was the bare minimum for him:

“I voted for stg75bn because I thought it was the smallest amount
we absolutely sure we needed to do”.

On economic prospects, Fisher sounded a grim note, saying the MPC
understood the “gravity of the situation.”

“Economic conditions in the world are serious. It is more uncertain
than at any time I can remember.”

While “things aren’t falling off a cliff,” Fisher suggested that
the UK economy remained vulnerable to outside events.

Ahead of Tuesday’s Autumn Statement from Chancellor George Osborne,
Fisher also said the government had to stick with its deficit-reduction
plan, noting it is important that the UK had a plan which “convinces the
markets.”

–London Bureau; tel: +442078627492; email: dthomas@marketnews.com

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