Bank poised to keep rates on hold
Published 31/10/2010 | 10:42
Bank of England plans for money-boosting measures will be in sharp focus again this week when policymakers gather for their latest meeting.
Quantitative easing will be top of the agenda on both sides of the Atlantic, as the US Federal Reserve also decides on monetary policy.
But while there is growing expectation for the Fed to announce more recovery aid, many now forecast the Bank to hold off from further action in the UK after much better-than-expected third quarter growth figures.
Figures showing a 0.8% rise in gross domestic product (GDP) suggested the recovery was not as weak as many believed and experts have quickly put back the calendar for any potential QE.
It is now widely expected the Bank's Monetary Policy Committee (MPC) will keep both rates on hold at 0.5% and QE at £200 billion in November.
Despite rate setter Adam Posen calling for a further £50 billion in QE during October, many believe he will not yet have gained the support of other colleagues.
The Bank will have access to its own November inflation forecast in time for the meeting, which may yet sway its decision.
But JP Morgan Chase economist Allan Monks believes the MPC will wait until the following report in February before embarking on any so-called QE2.
He said while much of the third quarter GDP growth could be put down to the temporary support from the Government and construction sectors, "nevertheless, underlying growth was firmer".
"This looks set to create enough uncertainty about the pace of the recovery to talk the middle ground members of the MPC out of voting for more stimulus."