Monetary policy 'to stay on hold'
Rate-setters are expected to keep monetary policy on hold tomorrow amid mounting speculation over a surge in Britain's third quarter economic growth.
Bank of England p olicymakers, who concluded their meeting today to allow some officials to attend the G20 meeting in Washington, have already pledged to keep rates on hold at 0.5% until unemployment falls to 7% and are also not expected to increase their £375 billion quantitative easing drive as figures point to an impressive pick-up in the recovery.
Some experts have pencilled in g rowth of as much as 1% between July and September in what would mark a sharp pick-up on the 0.7% growth seen in the previous three months.
But hopes have been reined in after disappointing official data for the manufacturing sector and worse-than-expected trade figures - described by one analyst as a " reality check" for the UK economy.
Think tank the National Institute of Economic and Social Research (NIESR) released its latest forecast, giving a more muted prediction for 0.8% growth in the third quarter.
According to the Office for National Statistics (ONS), o utput from British factories fell unexpectedly in August, sending overall industrial production down 1.1% in its biggest monthly fall for nearly a year.
The ONS added that the UK's trade deficit remained stubbornly high at £3.3 billion in August, down only marginally on the £3.4 billion recorded in July.
The figures came as a setback after last week's economic cheer, when the closely watched Markit/CIPS purchasing managers' index (PMI) showed the dominant services sector grew at its fastest pace for 16 years in the third quarter.
House price data from Halifax also showed a 6.2% year-on-year increase in September in the biggest hike since 2010 as the Government's Help to Buy initiative continues to send would-be buyers flocking into the market.
Howard Archer, chief UK and European economist for IHS Global Insight, is also forecasting 0.8% third quarter growth.
But he believes the recovery is on the right track despite this week's disappointing manufacturing data, which is likely to see monetary policy remain firmly on hold.
He said: ''The bar for any more QE now looks to be very high.
''It will likely only occur if the economy loses substantial momentum over the coming months, or if there is major financial turmoil and a sharp upward move in market interest rates when the US Federal Reserve finally starts to taper.''
While the strength of the recovery has increased pressure on the Bank's rates pledge, America's partial government shutdown and its decision to delay QE tapering has slightly pushed back the market's expectation for the first UK rate hike.
But the City is still expecting the Bank to raise historically low interest rates by early 2015 and remains unconvinced over the Bank's prediction that unemployment will not fall to the 7% threshold until mid to late 2016.