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Monday 7th December 2009
Rate predicted to stay on hold
The Bank of England is unlikely to deliver an early Christmas present to the economy as experts predict no-change in this week's monetary policy meeting.
Economists are widely expecting the Bank's rate-setters to hold-off from any further action after pumping in an extra £25 billion to boost the money supply last month.
The decision brought the total planned spending under the quantitative easing (QE) scheme to £200 billion.
But it also suggested the Monetary Policy Committee (MPC) was moving QE down a gear, coming as the smallest increase in the policy since it was launched in March and far less than the £50 billion predicted in the wake of disappointing third quarter gross domestic product (GDP) figures.
Any increase in rates above their current historic low of 0.5% is also seen as being some time off amid uncertainty over the economic recovery.
The MPC will gather for its two-day meeting on Wednesday, with a decision due at noon the following day.
Howard Archer, chief UK and European economist at IHS Global Insight, said it was "odds-on" that rates and QE would be left unchanged.
He added: "In fact, we have a suspicion that the MPC will now sit tight for many months to come. While the Bank of England appears to be keeping all of its options open, we suspect that the majority of MPC members would prefer not to increase QE again following November's £25 billion extension unless the economy suffers a serious relapse."
But Investec Securities economist Philip Shaw said the outlook for next year was "anything but simple".
"MPC members should enjoy making straightforward decisions while they have the opportunity - the situation is unlikely to last for long," said Mr Shaw.
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