By Sumeet Desai and Matt Falloon
LONDON, Feb 10 (Reuters) – The Bank of England may have to pump more money into Britain’s fragile economy, Governor Mervyn King said on Wednesday after the central bank forecast inflation would stand well below target in two years.
Presenting the BoE’s quarterly Inflation Report, King said recovery from the worst recession since World War Two would be slow with output below pre-crisis levels for some time to come.
And that gloomy outlook did not even take into account the likelihood of fiscal policy being tightened hard after an election expected on May 6.
The pound fell and government bonds rallied as investors bet it would be a long time before the BoE started raising interest rates from their record low of 0.5 percent — and could even boost its 200 billion pound asset-purchase scheme.
“It is far too soon to conclude that no more purchases will be needed,” BoE Governor Mervyn King told a news conference.