Bank of England policymakers will face pressure to unleash further emergency measures this week amid signs the UK is heading towards an unprecedented triple-dip recession.
A surprise fall in manufacturing activity in February – revealed last week – has shortened the odds on the central bank’s nine-strong monetary policy committee (MPC) pushing the button on a further £25 billion of quantitative easing.
Last month’s MPC minutes saw Governor Sir Mervyn King and Paul Fisher join previously lone voice David Miles in calls to restart the printing presses.
Interest rates, which have remained at 0.5 per cent for four years, will also be in the spotlight after Bank of England Deputy Governor Paul Tucker told MPs on the Treasury committee that he had put negative interest rates up for consideration.
While he admitted it was an idea that needed to be thought through carefully, the Bank is expected to look for other measures to kick-start the UK economy, which has weaved in and out of recession since the 2008 banking crisis.
Alan Clarke, UK economist at Scotiabank, said: “The recent noises from MPC members suggest that the MPC wants to do something, but it is not yet clear what. The default policy tool has tended to be more QE and a £25bn expansion at this week’s meeting seems to be the most likely outcome.”
But Howard Archer, chief UK economist at IHS Global Insight, said he thought the Bank would hold fire on more QE at its March meeting, partly because the recent weakening of the pound was stimulative in itself.