Bank tipped to hold back on more QE

The Bank of England is expected to hold back from unleashing additional emergency support for the economy this week.

It will maintain interest rates at their record low of 0.5 per cent and leave the targeted size of its quantitative easing (QE) programme at £375bn as the Bank works through £50bn of asset purchases announced in July.

Most economists think the Bank’s nine-strong monetary policy committee (MPC) will sanction further QE in November.

Hide Ad
Hide Ad

There has been little change in the economic outlook since the MPC’s last meeting, although SSE’s nine per cent hike in energy bills from next month and the impact of US drought on food prices have threatened the inflation outlook.

The Bank currently expects the rate of inflation – which increased to 2.6 per cent in July – to fall to the Government’s two per cent target by the end of this year.

Governor Sir Mervyn King and his colleagues will also want more time to assess the impact of the UK’s £80bn “funding for lending” scheme, which was launched in the summer with the aim of un-clogging the flow of credit.

Investec Securities economist Victoria Clarke said: “Over the past month the outlook hasn’t shifted drastically, but inflation risks do appear to have nudged up.

“Even so we continue to see the committee backing more asset purchases in November when the current target of £375bn is reached.”