PARIS (AFX) - The Bank of England may have to cut interest rates further unless a sharp fall in sterling boosts demand and inflation, the OECD said in its economic survey on the UK. The OECD said that while the BoE has eased monetary policy considerably, it "should stand ready to move swiftly" if the imbalances in the UK economy unwind abruptly or the slowdown is more severe than expected. The impact of this year's rate cuts will probably be felt in 2002, it said. "Looking ahead and taking into account the heightened downside risks due to the recent terrorist attacks in the US, further interest rate cuts might be required, unless a sharp fall in the exchange were to boost demand and inflation," it said. The OECD said that "it might be desirable at some point in the future" for the government to switch the formulation of the BoE's inflation target to the HICP, the harmonised index used across the European Union, from the RPI-X, the national measure. However, the HICP as it currently stands excludes owner-occupied housing costs, and it may be wise to wait until the EU reaches agreement on how to include these, the OECD said. In the event of the adoption of the HICP, the lowering of the BoE's target of 2.5 pct may become a more prominent issue, it said. The OECD warned the UK government to weigh the pros and cons of entering public-private partnerships as a shareholder to reduce its dependence on the incumbent franchise or concession holders. It said the UK also faces the challenge of increasing the low level and modest growth of productivity in the private sector. "While the thrust of the government's reform agenda is commendable it should be pursued in a way that fosters greater stability in the policy environment," it said. The OECD concluded that the UK's macroeconomic performance has been robust. "Growth has slowed only little so far and unemployment has declined further than most observers expected, without igniting inflationary pressures," it said. It said the impressive fiscal consolidation in recent years is providing ample room for automatic stabilisers to operate in the event of a sharpening downturn. Continuing with a focused, prioritised programme of structural reforms, while preserving the gains from a more stable, predictable framework for macroeconomic policy, offers the best prospect for ongoing, strong economic performance in the uncertain global environment, it said.