The majority of the Bank’s Monetary Policy Committee (MPC) believe the case for increasing its quantitative easing (QE) programme - injecting cash into the economy to stimulate growth - strengthened in the month running up to its September meeting.
The MPC even considered cutting interest rates below their current record low of 0.5%, minutes from the September meeting revealed, but members decided this would not be preferable to further QE.
A raft of disappointing economic surveys - especially in the services sector - pointed to weaker growth in the second half of the year than the MPC predicted in its key inflation report last month.
The MPC voted eight to one in favour of holding its QE, or asset purchases, programme at its current level of £200 billion, with external member Adam Posen reiterating his call to boost the stock by another £50 billion. All members voted in favour of holding interest rates.
The September minutes are the clearest signal yet that the Bank fears the UK economy is heading towards the rocks and will raise fears that the country is heading towards a double-dip recession.
Global growth fears were fuelled throughout August as the euro-zone debt crisis rumbled on, further cracks emerged in the US economy, and soft manufacturing, services and trade figures were published in the UK.
The Bank documents were published a day after the International Monetary Fund (IMF) warned that the global economy had entered a “dangerous new phase” and slashed its growth forecasts for the UK, euro-zone and US.
The IMF’s World Economic Outlook, published after the MPC held its meeting, estimates the UK will grow at 1.1%, down from 1.5% forecast in June and much lower than the 1.7% predicted by the Office for Budget Responsibility (OBR).
The minutes gave no hint as to exactly when the Bank might fire up its printing presses again but said a continuation of the current weak economic conditions would be enough to justify further QE at a “subsequent meeting”.
Mr Posen, who has voted in favour of increasing asset purchases for many months, believed the developments throughout August at home and overseas strengthened the case for boosting the QE programme.
The committee said most of the members who voted against increasing the QE stock still thought “it was increasingly probable that further asset purchases to loosen monetary conditions would become warranted at some point”.
But the committee resolved to wait to see how developments evolved in the “coming weeks” - including the actions in other countries.
The minutes added: “There was inevitable uncertainty about the precise impact of asset purchases on demand and inflation, but asset purchases were an instrument that would continue to be effective in further loosening monetary conditions in the current context.”
Howard Archer, chief UK and European economist at IHS Global Insight, said the minutes showed the MPC was “opening the door wide” to more QE “sooner rather than later”.
He said: “Barring a marked improvement in the economy over the next few weeks, which is currently hard to see, we expect the MPC to approve a further £50 billion in QE during the fourth quarter.”
Mr Archer said a boost to the asset purchase programme was likely in November but could happen as early as next month.
The Treasury was once again forced to defend Chancellor George Osborne’s tough austerity measures - which include an £80 billion package of spending cuts - yesterday following the IMF’s report.
Mr Osborne has come under pressure from business leaders, unions and opposition to reconsider his fiscal tightening plans in face of the increasingly fragile recovery.