Cash injection for economy held back

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The Bank of England held back from pumping more emergency cash into the economy yesterday amid hopes that the UK has avoided a technical recession in the first three months of the year.

The Bank’s Monetary Policy Committee (MPC) kept its quantitative easing (QE) stock at £325 billion, after injecting £50 billion in February, while holding interest rates at a record low of 0.5 per cent.

The MPC’s April meeting follows a number of positive surveys that have suggested the economy returned to growth in the first quarter of the year. But the upbeat mood in the City was jolted yesterday by figures showing a surprise contraction in manufacturing activity in February.

Many economists still expect another multibillion cash injection from the Bank later in the year, possibly in May.

The recovery has shown tentative signs of gathering pace, but the economy shrank by a bigger than previously thought 0.3 per cent in the final quarter of 2011, while the OECD said there was a further contraction of 0.1 per cent in the first three months of this year, meaning the economy was back in recession.