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Bank 'needs to stick to aggressive monetary policy'

Feb 12 2009

Positive predictions in the Quarterly Inflation report should not sway the Bank of England from easing monetary policy, according to the British Chambers of Commerce (BCC).

According to the latest figures, the Bank expects the UK economy to shrink by four per cent from mid-2008 to mid-2009, with a total decline of three per cent for the whole of 2009 anticipated.

However, it also predicts there will be a sharp recovery and growth experienced in 2010.

David Kern, chief economist at the BCC, says the prediction seems 'unduly optimistic' and claims the report does not adequately address the risk of deflation.

He adds: 'We urge the Bank of England not to allow these forecasts to deter them from easing monetary policy aggressively, so as to alleviate the threats facing the economy.'

Unveiling the report, Mervyn King, the Bank's governor, admits that the UK is in a 'deep recession' and hints that the organisation may have to consider 'unconventional measures' if benefits are not seen from recent interest rate cuts.

Yesterday (February 11th), figures from the Office for National Statistics revealed that UK employment rose to 1.97 million in the three months to December.

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