BoE's Bean - QE needed if economy worsens "significantly"

SOUTH CERNEY, England (Reuters) - The Bank of England may need to resume asset buying if economic conditions deteriorate sharply, while the euro zone debt crisis has pushed back the date for reversing the quantitative easing programme, BoE Deputy Governor Charlie Bean said on Wednesday.

At the start of this month, the BoE suspended its quantitative easing programme of gilt purchases.

But minutes of the May 9-10 meeting released earlier on Wednesday showed that for some the decision had been finely balanced. One policymaker, David Miles, urged an extra 25 billion pounds of purchases.

In a speech to the National Association of Pension Funds, Bean said more QE might be needed, though he did not discuss the economic outlook in depth.

"With the present heightened uncertainty associated with the problems in the euro area, the likely future date for us to commence selling gilts has receded somewhat. And if conditions do deteriorate significantly, we may need to re-start the programme of purchases," he said.

On Tuesday the International Monetary Fund urged the BoE to inject more stimulus into Britain's sluggish economy now, and possibly even to cut interest rates, which are already at a record low 0.5 percent.

Figures on Wednesday showing the biggest fall in retail sales in more than two years reinforced concerns about Britain's recession-hit economy and THE possible need for more government or central bank aid.

Since May's BoE meeting, data has shown a bigger-than-expected fall in inflation to 3.0 percent, possibly easing the way for the BoE to loosen policy.

Earlier this month, Bean wrote that the BoE's policy stance was "highly stimulatory", and should help put the economy back on an even keel, but did not give any indication that further stimulus was needed .

On Wednesday he defended the BoE's QE programme to pension funds, many of which are unhappy about the way in which the policy has reduced British government bond yields, increasing their costs.

Bean said that QE had also raised share prices, meaning that the impact was neutral for a fund which was not in deficit before the financial crisis.

In the longer run, gilt yields were likely to rise, he said, but offered no timescale for this.

"While there are reasons to expect yields to return towards historically more normal levels at some stage, it is difficult to know when that will be and how quickly it will occur," he said.

(Reporting by David Milliken; Editing by John Stonestreet)