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BOE Will Increase Bond Plan by Middle of Next Year, BCC Says

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Dec. 5 (Bloomberg) -- The Bank of England will have to increase its asset-purchase plan by the middle of 2011 because of the risks of a “setback” to economic growth, the British Chambers of Commerce said.

The Monetary Policy Committee will increase its bond program by 50 billion pounds ($78.5 billion) to 250 billion pounds, the BCC said in an e-mailed report today in London. The economy will grow 1.8 percent this year, 1.9 percent in 2011 and 2.1 percent in 2012, according to the lobby group’s forecasts.

“The MPC may be reluctant to increase quantitative easing because of concerns over inflation,” BCC Chief Economist David Kern said in the statement. “But there is a strong case for easing monetary policy further at a time when fiscal policy is being tightened.”

Bank of England policy makers have split three ways over whether to fight inflation by raising interest rates or add stimulus to boost economic expansion. The government’s fiscal watchdog last week cut its growth forecast for next year as the government prepares to implement the deepest spending cuts since World War II.

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

To contact the editor responsible for this story: John Fraher at jfraher@bloomberg.net

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