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LONDON: British finance minister Alistair Darling said in an interview Wednesday that "we are far from through" the economic downturn, a sign that he will revise his forecast that recovery will begin in mid-2009.
"In the current climate, no responsible finance minister could say that's the job done, far from it. We are far from through this," he told the Financial Times.
In November, Darling forecast that Britain should now be at the midpoint of a one-year recession, and recovery was expected by the second half of the year.
He told the business daily that those projections were "based on the evidence we had at the time", adding: "This year is going to be difficult. There are going to be some tough calls."
Darling said the government's multi-billion-pound fiscal stimulus was the right way to help the economy, even though it involved massive borrowing, and he would "see what else I can do to support the economy" in the next budget.
He has refused to rule out fresh government action to help struggling banks following October's multi-billion-pound bailout of Royal Bank of Scotland (RBS), HBOS and Lloyds TSB, and stressed international action was vital.
Darling said he would not "hang back" and wait for global agreement before taking further domestic action but noted: "We have got to ensure that whatever we do works with what other countries are doing."
Meanwhile, analysts said they expect the Bank of England to slash interest rates for a third month running on Thursday, bringing them to their lowest ever levels as Britain readies to join a growing list of nations officially in recession.
British interest rates have never stood below the current level of 2.0 per cent since formation of the Bank of England in 1694, 315 years ago.
Analysts are forecasting the BoE's nine-member Monetary Policy Committee (MPC) to reduce the central bank's key lending rate by as much as one per cent on Thursday at the conclusion of its latest monthly two-day meeting.
"Despite cutting interest rates by another one per cent in December to two per cent, the Monetary Policy Committee has signalled that it has more work to do," noted Capital Economics analyst Vicky Redwood.
"Given the further deterioration in the economic outlook, we now think that interest rates will fall all the way to zero, with another one per cent cut at the upcoming meeting getting rates halfway there."
The Bank of England has embarked on a policy of sharp rate-cutting since late last year, in line with the US Federal Reserve and European Central Bank (ECB), as the global economy grapples with its worst period since the 1930s Great Depression.
"With the recession deepening, credit conditions remaining worryingly tight and inflationary pressures retreating sharply, there is intense pressure on the MPC to bring interest rates down sharply further," said Howard Archer, chief Britain economist at IHS Global Insight.
The Bank of England believes that Britain is already in recession although this will be confirmed officially only following publication of economic growth data later this month.
Britain's economy contracted by 0.6 per cent in the three months to September compared with output in the previous quarter, the country's official statistics body said recently.
That was the steepest quarterly drop since 1990 but Britain is not officially in recession until it reports two quarters running of negative economic growth, or contraction.
"Indications are that the fourth quarter probably saw markedly sharper contraction probably of around one per cent quarter-on-quarter," said Archer.
"Latest data and survey evidence are extremely weak across the board, be it related to service sector activity, manufacturing, construction, retail sales or business investment. Furthermore, unemployment is picking up at an alarming rate."
Also ahead of Thursday's decision, it has been revealed that British house prices slumped by a record 16.2 per cent in the three months to December 2008.
Britain's leading home loans provider Halifax, which gathered the data, added that prices were set to fall further in 2009.
At two per cent meanwhile, the current level of British interest rates is the lowest since 1951. Such historically-low borrowing costs have weighed heavily on the British pound in recent months, as investors are put off by less attractive yields on savings.
As well as losing much of its value versus the dollar, sterling has also tumbled to stand close to parity with the euro.
"What may prevent a more aggressive move (by the BoE on Thursday) is potential worries about the impact on sterling," said ING senior economist James Knightley.
The European single currency is winning support versus sterling thanks to eurozone borrowing costs standing currently at a more attractive level of 2.5 per cent.
The ECB has cut its main lending rate in three rapid fire moves since early October, but with the eurozone economy mired in recession, analysts expect yet another cut on January 15.
The US Federal Reserve has used up its ammunition on monetary policy by slashing its base lending rate to virtually zero in December.
- AFP/yb
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