Bank of England in no rush for more stimulus despite bleak economy

By David Milliken and Olesya Dmitracova

LONDON (Reuters) - Britain's economy will barely grow this year and may have taken a bigger hit from the euro zone debt crisis than thought, the Bank of England said on Wednesday, but it gave little indication that it would rush to pour further stimulus into the economy.

The BoE resumed its asset buying last month, launching a four-month, 50-billion-pound ($78 billion) program with newly created money to keep a lid on borrowing costs and pump more cash into the economy.

Since then, figures have shown Britain's recession has deepened, with little sign of a hoped-for bounce in activity in July or a boost from the Olympic Games the country is hosting.

"We are navigating rough waters, and storm clouds continue to roll in from the Euro area," Bank of England Governor Mervyn King told a news conference, presenting the central bank's latest forecasts.

"Output has contracted in each of the past three quarters, but the underlying data is probably not as weak as the headline data suggests," he said.

Britain is languishing back in recession as government spending cuts, the drag from Europe, bad weather and one-off factors including an extended break for the queen's Diamond Jubilee celebrations weigh.

The country has not recovered from the financial crisis, and many Britons are worse off as the government's tax hikes and spending cuts to slash a huge budget deficit as well as soaring prices outpaced meager wage rises and eroded living standards.

If the Bank is to provide further help, King signaled it would come via more money printing rather than cutting interest rates, already at a record low 0.5 percent.