May 15 (Bloomberg) -- The Bank of England’s forecasts show Governor Mervyn King may need to print more money than the 150 billion pounds ($227 billion) currently authorized by Chancellor of the Exchequer Alistair Darling, Morgan Stanley said.

The bank may have to ask the Treasury to expand the asset purchase program after predicting this week that inflation will stay below its 2 percent target even if it prints the currently planned 125 billion pounds, Lauren Mutkin, Morgan Stanley’s head of European fixed-income strategy, said in a note today.

King forecast a “a relatively slow and protracted recovery,” on May 13, saying that inflation is more likely to stay below the goal in the next two years than to exceed it. Policy makers have resorted to printing money and using it to buy securities in U.K. debt markets after they cut the benchmark interest rate to a record low of 0.5 percent.

“It opens the door not just to further gilt purchases by the bank, but potentially to an increase in the total scale of purchases authorized by the Treasury,” Mutkin said in the report. “All this is very bullish for gilts.”

Policy makers last week increased their asset purchases with newly created money by 50 billion pounds, bringing the total 25 billion pounds short of the maximum allowed. King said on May 13 it’s too early to assess the program’s impact.

Lena Komileva, an economist at Tullett Prebon Plc, also said in a May 13 note that the asset purchase program will probably be expanded. Ross Walker at Royal Bank of Scotland Group Plc said the forecast “leaves the door open for further asset purchases, but hints that quantitative easing is unlikely to stretch far beyond 150 billion pounds.”

To contact the reporter on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net.

Last Updated: May 15, 2009 08:06 EDT