The Bank of England is expected to resist calls to pump more emergency cash into the economy on Thursday despite fears the UK may have slipped back into recession.
The economy shrank by a bigger than previously thought 0.3 per cent in the final quarter of 2011, according to revised figures, while the OECD said there was a further contraction of 0.1 per cent in the first three months of 2012, meaning the economy was back in recession.
Despite the gloomy figures, it is thought to be “a stone dead certainty” that the Bank’s Monetary Policy Committee will keep its quantitative easing (QE) stock at £325bn after injecting £50bn in February, while interest rates are held at 0.5 per cent.
Two of its nine members are expected to repeat calls for an additional £25bn QE boost but are set to be outvoted by others who do not want to rush into pumping more money into the economy as it could push up inflation and further squeeze households.
Many analysts believe the Bank will not sanction further QE until next month at the earliest, after the latest £50bn injection has been fully rolled out. In the meantime, it is likely to hold fire and see how the economy performs.
While the OECD believes the economy shrank in the first three months of the year, other economists are more upbeat after recent surveys pointed to modest growth, with the manufacturing and powerhouse services sectors thought to have rebounded.