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LONDON (MNI) - The Bank of England would extend its program of
quantitative easing beyond the currently agreed ceiling of Stg200
billion if the economy required it Bank of England Deputy Governor Paul
Tucker said in an interview published Thursday.

Speaking to The Scotsman Tucker said an increase in the scale of
the program "would be possible and it would happen" should the MPC deem
the economy required it.

However he added that the economy now looked to be on a path to
recovery although the strength of the recovery was still unclear

"The great challenge now is that for some considerable time it will
be hard to tell whether we face anaemic growth or if we are facing
above-trend growth" Tucker said.

And he sounded a warning that anaemic growth could trigger a new
wave of job cuts and economic weakness: "If we have anaemic growth there
will be more layoffs more cutbacks more scrapping of investment. A
great deal will depend on the rest of the world" he said.

Tucker made clear that the environment in which the Monetary Policy
Committee is trying to set policy is highly unclear:

"Another area of uncertainty is the extent to which households will
want to save more".

The banking sector remains a key area of fragility which could
threaten the economic recovery:

"A third question is how much the banking system will be prepared
to meet rising demand for credit as the economy recovers.

Tucker said that a "brighter spot" had been the strength of
the capital markets:

"A number of large companies across Europe UK and the US have been
able to issue bonds and equity which has strengthened their balance
sheets. They have been using the proceeds to repay bank debt which also
strengthens bank balance sheets and allows them to lend to SMEs. So it
has not been all bad."

He said lending growth from the banks had been weak though
anecdotal evidence was mixed.

"Many companies feel they are getting a raw deal from the banks
but one definitely meets companies that say the banks are out there
again. Frankly no-one can speak with conviction in either direction."

--London Bureau (+20 7634 1655) ukeditorials@marketnews.

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