Boe’s Tucker open to further easing

Cbank eyes ways to boost lending

LONDON, Feb 26, (RTRS): Bank of England Deputy Governor Paul Tucker said on Tuesday he would agree to the central bank buying more government bonds if needed and that the bank was considering new ways to boost lending.

He also said the pound may need to weaken more, a comment that pushed sterling to near 2-1/2 year lows against the dollar.

Tucker was among six policymakers who voted against new purchases of government bonds (gilts) this month, pitting him against Governor Mervyn King and two other officials who backed more bond buying, or quantitative easing (QE).

The split raised expectations in financial markets that the Bank of England would eventually pursue more stimulus.

“I remain open to doing more QE, depending on the outlook for demand and inflation,” Tucker said in an annual report to British parliamentarians.

But Tucker also said the impact of bonds bought in the past might yet give a greater boost to Britain’s economy than so far seen, as the initial effectiveness had been offset by concern about the global economy at the time.

“The existing degree of monetary easing from QE is likely to gain more traction on spending than it had last autumn, given reduced tail risks from the international environment,” he said.

Britain’s economy showed no growth last year and contracted in the fourth quarter, despite the central bank having spent a total of £375 billion ($567 billion) on its QE bond-buying programme and with interest rates still at 0.5 percent.

When pressed by lawmakers about the possibility of more bond-buying, Tucker said the Bank of England’s nine-strong Monetary Policy Committee had not written it off.

“Nobody on the committee thinks that QE has reached the end of the road and that it is not a useful instrument anymore. We stand prepared to do more, if we judge that necessary,” he said.

Unchanged

Government bond prices were unchanged by the comments of Tucker and other Bank of England officials in parliament.

The Bank of England has signalled it will tolerate inflation remaining above its 2 percent target because it views the impact of a weaker pound and some price increases as temporary.

Tucker said it was important not to give the impression the central bank was relaxing its commitment to bringing down inflation over the medium term. “We are, in today’s language, (doing) flexible inflation targeting but