LONDON (dpa-AFX) - The Bank of England is set to carefully review expanding its asset purchases and other policy tools to stimulate the economy at its meeting later today, as recent data signal no clear signs of recovery.
Nonetheless, economists expect policymakers to sit tight on quantitative easing. The outcome of the two-day rate setting meeting is due at 7.00 am ET.
The size of the asset purchase plan currently stands at GBP 375 billion and the interest rate has been held steady at a record low 0.50 percent since March 2009.
At its meeting in February, a call for additional stimulus by Governor Mervyn King and two policymakers, Paul Fisher and David Miles, were overturned by a majority of six members.
If there are monetary policy tools that are more reliably effective in boosting demand, they should be used, Miles said in a speech last month.
Chief UK economist at IHS Global Insight Howard Archer said he believes that there could well be two GBP 25 billion helpings of QE to come, with one in the second quarter and another in the third quarter, taking the stock up to GBP 425 billion.
The latest figures from the central bank showed that banks reduced their lending to firms and households in the fourth quarter dampening hopes that the Funding for Lending Scheme will revive recovery.
Earlier in the day, the British Camber of Commerce cut its growth forecast for 2013 to 0.6 percent, citing an unexpected 0.3 percent contraction in the fourth quarter of 2012 and worsening global growth prospects.
It also faces challenges from austerity measures as the government aims to contain its huge public debt after it lost the coveted AAA bond ratings for the first time since 1978.
Moody's downgraded the rating by one notch to Aa1. Standard & Poor's as well as Fitch placed the triple A ratings of the U.K. on negative watch last year.
January inflation came in at 2.7 percent. The rate has been at this level since October and it is expected to stay above the 2 percent target for the next two years.
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