A top Bank of England policymaker told MPs on Tuesday he was open to the possibility of the central bank buying more government bonds but existing stimulus was likely to become more effective at boosting growth.
"I remain open to doing more QE (quantitative easing) depending on the outlook for demand and inflation," Paul Tucker, a deputy governor, said in a report to MPs.
Tucker was among six bank policymakers who voted against renewed purchases of government bonds earlier this month. The bank's governor, Mervyn King, surprised markets by joining two other officials to back more QE, raising expectations that the bank would eventually carry out more stimulus.
In an annual report, Tucker said the effectiveness of the Bank's bond-buying programme had been hurt by the concerns about the global economy during 2012 and about the prospects for recovery.
"I would also judge that the existing degree of monetary easing from QE is likely to gain more traction on spending than it had last autumn, given reduced tail risks from the international environment," Tucker said in the report.
The bank's other deputy governor, Charles Bean, said in a separate report to MPs that he expected the British economy to improve gradually, helped by an improvement in financial markets.
"At present, my expectation is that growth will gradually strengthen this year and next on the back of that, a further easing in credit conditions, and an improvement in the global environment. But downside risks remain, especially in the euro area," Bean said.
(Reporting by UK economics team, writing by William Schomberg. Editing by Jeremy Gaunt.)