Belfast Telegraph

Sunday 21 September 2014

BoE chiefs unlikely to take action as economy fears grow

The Bank of England is expected to resist calls for further emergency support for the economy today in the face of mounting evidence that the recovery is grinding to a halt.

The Bank's Monetary Policy Committee (MPC) is expected to keep interest rates at their record low of 0.5% while its quantitative easing (QE) programme will remain at £275bn following today's meeting.

The no-change decision will come despite influential think-tank NIESR estimating that economic growth slowed once again in the three months to November to 0.3% from 0.4% in the three months to October.

Elsewhere, official figures revealing a larger-than-expected 0.7% contraction in industrial production and manufacturing in October have further fuelled fears of a double-dip recession.

The weak figures also follow warnings from Bank Governor Sir Mervyn King that the UK faces a systemic crisis and that banks must brace themselves for a potential eurozone collapse amid fears of a second credit crunch.

David Kern, chief economist at the British Chambers of Commerce (BCC), called for action from the MPC.

He said: "With the government implementing its tough deficit-cutting measures, and while the eurozone's problems create worldwide banking risks, UK monetary policy must remain as expansionary as possible."

He added: "Given the current economic challenges, we believe that the MPC should announce a further £50bn increase in the QE programme on Thursday to £325bn."

But according to the minutes from the MPC's November meeting, a further cash injection to boost the economy is highly probable but not until next year, as the last £75bn boost in October will take a couple more months to complete.

Howard Archer, chief UK and European economist at IHS Global Insight, expects the MPC to enact a further £50bn of QE in both the first and second quarters of 2012, taking the total up to £375bn.

He said: "The December meeting of the Bank of England's Monetary Policy Committee remains unlikely to result in any early Christmas presents for the needy UK economy on Thursday despite fears of recession being magnified by the news that industrial production plunged 0.7% in October."

The MPC pumped an extra £75bn into the economy in October amid signs the recovery was heading for the rocks and the picture has continued to worsen.

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