Bank of England set to ignore calls for quantitative easing
The Bank of England is set to ignore mounting pressure to pump more money into the economy on Thursday amid fresh fears of another global recession.
Worries about the strength of the world economy have intensified in recent weeks following a raft of gloomy data which suggested the recovery is running out of steam and sparked a bloodbath on world stock markets.
Amid the financial gloom, the prospect of interest rates being hiked from their record low of 0.5% has faded but there are now heightened calls for another round of quantitative easing (QE), or money printing, to inject some life into the UK's flagging economy.
When the Bank's Monetary Policy Committee (MPC) last met a month ago it voted unanimously to hold interest rates for the 29th month in a row as two members who had previously voted for rates to be hiked to 0.75% changed their minds as the economy showed increasing signs of weakness. Many economists now do not expect rates to rise for more than a year.
MPC member Adam Posen was alone in voting for the stock of QE to be increased by £50 billion to £200 billion, while the minutes of the meeting revealed that other members were considering the option.
Since then he has made a public call for the world's biggest economies to print more money to fend off the growing financial malaise.
Mr Posen recently told reporters: "It is past time for monetary policy to be doing more to support recovery.
"Additional monetary stimulus is the last line of defence for the advanced economies today.
"G7 central banks should purchase more assets if we are to have any hope of our economies ever catching up."
The British Chambers of Commerce (BCC), which downgraded the UK's growth prospects in a report published on Thursday, suggested the Bank could print more money if the current economic weakness continues.
But economists do not expect the MPC to embark on more QE unless the economy deteriorates further.
Brian Hilliard, an economist at Societe Generale, said: "QE2 is now centre stage at the MPC but we do not think any decision will be taken to expand asset purchases at the next meeting.
"Other members are considering this but we do not think they are yet persuaded of the need to provide more stimulus."
Howard Archer of IHS Global Insight added: "We get the impression that most MPC members are wary about going back down the QE path given the current high level of consumer price inflation and still significant longer-term inflation risks.
"We currently lean towards the view that further QE will only occur if the economy actually sees renewed contraction."
That's some guestlist! Stunning images show huge dynastic wedding between Ultra-Orthodox Jewish families which attracted 25,000 guests
'He was always smiling': Lee Rigby named as Woolwich victim
Heathrow airport reopens runways after British Airways plane 'on fire over London' makes emergency landing
Two bailed after arrest over Woolwich attack Twitter comments
Exclusive: Woolwich killings suspect Michael Adebolajo was inspired by cleric banned from UK after urging followers to behead enemies of Islam
- 1 Pope Francis: Being an atheist is alright as long as you do good
- 2 'He was always smiling': Lee Rigby named as Woolwich victim
- 3 'Something passed underneath us, quite close': Airbus A320 has close encounter with UFO
- 4 Lord of the Sings: Sir Christopher Lee, 91, to release heavy metal album
- 5 Two bailed after arrest over Woolwich attack Twitter comments
BMF is the UK’s biggest and best loved outdoor fitness classes
Find out what The Independent's resident travel expert has to say about one of the most beautiful small cities in the world
Nook is donating eReaders to volunteers at high-need schools and participating in exclusive events throughout the campaign.
Get the latest on The Evening Standard's campaign to get London's children reading.
Win anything from gadgets to five-star holidays on our competitions and offers page.