Bank set to pump £75bn into economy

Monetary Policy Committee expected to agree another round of quantitative easing

The Bank of England is set to pump up to £75bn of newly printed money into the ailing UK economy as fears grow that the eurozone crisis could drag Britain deeper into recession.

City analysts are expecting the Bank's Monetary Policy Committee (MPC) to extend its £325bn Quantitative Easing programme this week. The average forecast is for another £50bn of UK sovereign bond purchases.

But several economists say that the MPC is likely to go even further at its monthly meeting on Thursday. "We are confident this will be another occasion when the Bank of England errs on the side of doing more rather than less," said Sam Hill of RBC Capital Markets. He expects the nine-member MPC to vote to buy another £75bn in assets over the next four months.

According to Mr Hill, the MPC is likely to feel it has more room to stimulate the economy because inflation has fallen faster than many expected, with the Consumer Prices Index dropping to 2.8 per cent in May.

"The last two months of inflation data is the first time it has undershot the consensus since 2007," said Mr Hill.

Research by the Bank suggests that previous rounds of QE have boosted GDP, but also raised inflation.

Peter Dixon, a global equities economist at Commerzbank, said that the MPC's final decision could be influenced by signs of stress in financial markets next week.

He said: "Our working assumption is that the committee will raise the QE limit by £50bn, but given the fragility of the economy and financial markets we cannot rule out an even bigger increase."

At its June meeting, the MPC was split, with five members voting to keep the QE programme on hold and four voting to extend it. But the published minutes of that meeting showed that most MPC members acknowledged that "further stimulus was likely to become warranted at some point".

Since that meeting, the Bank Governor, Sir Mervyn King, who was in the unsuccessful minority last month, has dropped some heavy hints that the situation has deteriorated sufficiently to warrant more asset purchases.

At last month's Mansion House dinner he said "the case for a further monetary easing is growing".

However, Howard Archer, the chief UK economist at IHS Global Insight, argued: "It could be that the five MPC members currently against more QE would prefer to hold fire for at least a little longer."

News
Russell Brand was in typically combative form during his promotional interview with Newsnight's Evan Davis
peopleReports that Brand could stand for Mayor on an 'anti-politics' ticket
News
The clocks go forward an hour at 1am on Sunday 30 March
news
Arts and Entertainment
The Doctor finds himself in a forest version of London in Doctor Who episode 'In the Forest of the Night'
TVReview: Is the Doctor ever going stop frowning? Apparently not.
News
Voluminous silk drawers were worn by Queen Victoria
newsThe silk underwear is part of a growing trade in celebrity smalls
PROMOTED VIDEO
Sport
footballMatch report: Real fight back to ruin Argentinian's debut
News
Candidates with surnames that start with an A have an electoral advantage
newsVoters are biased towards names with letters near start of alphabet
Arts and Entertainment
Isis with Lord Grantham (Hugh Bonneville)
TV
Arts and Entertainment
Jay James
TVReview: Performances were stale and cheesier than a chunk of Blue Stilton left out for a month
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Compensation and Benefits Manager - Brentwood - Circa £60,000

£60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...

Data Analyst/Planning and Performance – Surrey – Up to £35k

£30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...

IT Systems Business Analyst - Watford - £28k + bonus + benefits

£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

Markit EDM (CADIS) Developer

£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

Day In a Page

Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

Wilko Johnson, now the bad news

Former Dr Feelgood splits with manager after police investigate assault claims
Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

Mark Udall: The Democrat Senator with a fight on his hands

The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
New discoveries show more contact between far-flung prehistoric humans than had been thought

New discoveries show more contact between far-flung prehistoric humans than had been thought

Evidence found of contact between Easter Islanders and South America
Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

Cerys Matthews on Dylan Thomas

The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
DIY is not fun and we've finally realised this as a nation

Homebase closures: 'DIY is not fun'

Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

Air New Zealand's wizard in-flight video

The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

Pumpkin spice is the flavour of the month

The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
11 best sonic skincare brushes

11 best sonic skincare brushes

Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

Paul Scholes column

I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

While other sports are stalked by corruption, we are an easy target for the critics
Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?