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Calls for QE to be expanded

<div>THE worst of the recession may be over but the Bank of England should expand its &pound;125bn quantitative easing (QE) programme to ensure the economy stabilises rather than heads into a double-dip recession, the British Chambers of Commerce (BCC) said.<br /><br />David Kern, chief economist at the BCC, said: &ldquo;With cashflow, capacity utilisation, and price pressures remaining weak, it is important that the short-term policy stance stays expansionary.&rdquo;<br /><br />He added: &ldquo;I want to see the MPC intensify and accelerate the pace of quantitative easing. It should certainly use up the final &pound;25bn and they will have to go, and should go, beyond that &ndash; I think they will need &pound;180-200bn of QE.&rdquo;<br /><br />George Buckley, chief UK economist at Deutsche Bank, suspects that QE will be the one of the last measures withdrawn and interest rate hikes will come first.<br /><br />However, he said that UK household indebtedness stands at 170 per cent of GDP &ndash; the highest in the G7 &ndash; posing a serious risk to recovery.<br /><br />Although the BCC&rsquo;s quarterly economic survey shows progress in both manufacturing and service sectors &ndash; including a marked strengthening in confidence &ndash; levels are still very weak by historical standards, and need to be encouraged, it said.<br /><br />The BCC&rsquo;s director general David Frost said: &ldquo;The government has to nurture this confidence, not snuff it out nor take it for granted. Signs of improvement cannot be an excuse to increase business tax.&rdquo;<br /><br />The BCC&rsquo;s concerns were echoed by World Bank president Robert Zoellick, who told the G8 recent gains could be reversed easily, and the pace of recovery in 2010 is far from certain.</div>