BOE Can Loosen Policy Amid Weak U.K. Growth Outlook, IMF Says

The Bank of England can loosen policy further to boost an economy that will struggle to grow this year, the International Monetary Fund said.

British economic growth “will be weak in early 2012, before recovering,” the Washington-based IMF said in its World Economic Outlook today. “With inflation expected to fall below the 2 percent target amid weaker growth and commodity prices, the Bank of England can further ease its monetary policy stance.”

The U.K. central bank maintained the size of its bond- purchase program at 325 billion pounds ($517 billion) this month and has predicted that the inflation rate will drop below its goal this year. Still, divisions among policy makers have emerged as a jump in energy costs threatens to underpin prices and data show services and manufacturing picking up after the economy contracted 0.3 percent in the fourth quarter.

U.K. gross domestic product will increase 0.8 percent this year, the IMF said today, raising a previous projection for 0.6 growth published in January. It maintained a forecast for 2 percent expansion in 2013.

To contact the reporter on this story: Scott Hamilton in London at shamilton8@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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