UK economy expected to suffer contraction in 2011

The economy could suffer another period of contraction in 2011, the Bank of England’s executive director for markets Paul Fisher said in a newspaper interview on Thursday.

“It’s not impossible that we would see a quarter of negative growth,” Fisher, who is also a member of the Monetary Policy Committee, told the Daily Telegraph.

“The… UK tends not to be that volatile quarter to quarter but in this sort of situation when you are recovering from a deep recession it is not impossible,” he said.

Fisher was quoted as saying the recovery was on track but that “at this stage of recovery in a cycle it’s always going to be bumpy.”

He told the newspaper the risk of deflation has “diminished,” adding the biggest risks to the economy were external.

Fisher did not rule out the possibility of restarting the central bank’s 200 billion pound quantitative easing programme.

“I would say the chances are less than they were but it’s still not ruled out,” he said.

“It is most likely to be triggered if we have some sudden shock or lurch in the economy that is unexpected.

Source: Reuters