The Bank of England will increase its asset-purchase program next month to support the U.K. economy, the Centre for Economics and Business Research said.
The economy shrank in the previous quarter and is set to do so in the current period, the London-based research group said in a report released Monday. It cut its forecast for expansion in 2012 to 0.4 percent from 0.6 percent and warned of a 1.1 percent contraction if the euro-area debt crisis worsens substantially.
The central bank will keep its benchmark interest rate at 0.5 percent until 2016 and increase so-called quantitative easing to 400 billion pounds ($611 billion) this year, according to the report. The bank last week maintained its bond-purchase target at 275 billion pounds.
“We take no pleasure in outlining such a bleak forecast,” said Douglas McWilliams, the CEBR’s chief executive. “But the world is going through a fundamental change."
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