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Bank's Posen says policy can go either way - report

LONDON (Reuters) - Monetary policy can move either way and the June budget will not make a significant difference to Bank of England forecasts, Monetary Policy Committee member Adam Posen was quoted as saying on Tuesday.

In an interview with Dow Jones Newswires, Posen said there was a huge amount of uncertainty surrounding the economic outlook, which meant that the MPC could ultimately raise rock-bottom interest rates or even loosen policy further.

“Either things get worse ... in which case we have to try to act, or they don’t get worse, in which case the kind of things that Andrew Sentance has been talking about or Spencer Dale’s been talking about are relevant and we tighten,” he was quoted as saying.

Fellow MPC member Andrew Sentance surprised markets last month when minutes of policymakers’ June meeting showed that he voted for a rate rise from 0.5 percent to 0.75 percent against the rest who backed holding rates steady.

Minutes of the July meeting will be published on Wednesday. Sentance is expected to have repeated his call for higher rates but Posen’s comments indicate BoE chief economist Dale may also be leaning that way.

Posen told the newswire that the June budget, the harshest in a generation, would have a slightly greater downward impact in the next 18 months but not by much.

“We have to wait for the October spending review to have it fully in hand, but ... we think (the) contraction will be a little bigger in the next 18 months than we had built into our forecasts,” Posen was quoted as saying.

“The difference we’re talking about is in tenths of a percent of GDP, not in whole (percentage) points of GDP, and in relatively few tenths of a percent.”

Reporting by Sumeet Desai; editing by David Milliken/Ruth Pitchford

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