BoE's Dale cautions against more asset buys

Pedestrians pass The Bank of England in the City of London February 14, 2012.

LONDON (Reuters) - More asset purchases by the Bank of England may not be warranted even if Britain's economy continues to struggle, and the bank should keep its focus on bringing down inflation, its chief economist said on Wednesday.

Spencer Dale said the Bank's 325 billion pounds of quantitative easing to date had helped cushion the economy against the impact of turmoil in the euro zone, but the Bank's top goal had to be getting inflation back down to 2 percent.

Dale, like all but one of the Bank's nine-member Monetary Policy Committee, voted not to extend the central bank's asset purchase scheme this month.

But the knock-on impact on Britain's fragile economy from the euro zone debt crisis means a growing minority of economists expect the BoE to restart the programme later this year.

"At the moment, our view is that ... inflation should slow to around the target at the back end of 2013 and as a result the current stance of policy looks about broadly right," Dale said in a television interview with CNBC.

"If what we are seeing is as much a supply-side problem as a demand-side problem, then just more demand stimulus, more QE, may not be the answer," he added.

There was little market reaction to his comments.

"We already knew that he's a hawkish member of the club," said Vatsala Datta, a fixed income strategist at Lloyds.

Dale has previously expressed worries that the slow fall in British inflation towards its 2 percent target could be due to underlying supply inefficiencies in the economy, which would not be helped by further QE.

He said he expected to see an economic recovery this year - helped in part by the current level of sterling - though he did not foresee a return to "rip-roaring" growth rates this year or next.

"That's ... in part because a very significant squeeze that we have seen on household income starts to ease, as a result of which we may start to see some stabilisation in consumption. We've seen that in some of the recent data ... and that may help companies to have confidence in investment," he said.

(Reporting by David Milliken and Olesya Dmitracova; Editing by John Stonestreet)