Bank's aid package thrown into doubt as money supply slips

The Bank's preferred measure of bank and building society deposits and cash fell 0.5 per cent in December – or 7.6bn – after rising by 0.9 per cent in November. Lending grew by 0.4 per cent, slowing from 0.7 per cent the previous month.

Rate-setters are trying to boost the economy through quantitative easing – buying up assets with newly-created money – after slashing rates to record lows.

This programme has ended after nearly a year but the slim signs of progress coupled with the UK's anaemic 0.1 per cent growth in the final quarter of 2009 could prompt fierce debate at the Bank's policy meeting this week over another dose of the medicine.

Bank Governor Mervyn King has called the current growth in the money supply "undesirably low", although another member of the Monetary Policy Committee, Andrew Sentance, has voiced fears over inflation if the economy picks up more quickly than expected.

There were some more positive signs for rate-setters in yesterday's figures, including accelerating growth in deposits and cash held by businesses and households, but they also showed growth in lending to businesses falling to 0.1 per cent during December, from 0.3 per cent the previous month.

Colin Ellis of Daiwa Capital Markets Europe said the relapse showed the risks of "getting too excited" over a single month of improvement in November.