'Be ready to act in new year' Bank is urged after holding fire on stimulus

Calls intensified yesterday for the Bank of England to "act forcefully" if the British recovery faltered, as the central bank voted to freeze both interest rates and its quantitative easing programme.

• David Kern: MPC must stand ready to boost economy

The British Chambers of Commerce (BCC) called for the BoE to increase its asset purchases from banks, which free up their lending to business and personal customers, by 50 billion early next year if a new downturn threatened.

Business concerns were heightened yesterday by data showing that the country's global goods trade deficit unexpectedly widened in October to 8.53 billion. Imports hit their highest level since records began in 1992.

City analysts said this raised questions about trade's contribution to pulling Britain out of the downturn in the teeth of the government's 80bn of public spending cuts.

The BCC's call for the BoE to be vigilant followed the bank's monetary policy committee (MPC) voting to keep rates at the historic lows of 0.5 per cent. Committee members also voted to keep the level of asset purchases from banks at 200bn.

The BCC said both decisions were expected but that the three-way voting split on the MPC revealed in recent minutes "introduces a regrettable element of uncertainty about future policy at a time when the economy is still facing major risks".

David Kern, chief economist at the BCC, said: "Suggestions for interest rate increases must be rejected, as businesses and consumers will soon be facing additional pressures when the government's austerity measures start to bite early next year."

Kern said that despite positive economic news recently, which has included strong manufacturing figures boosted by exports, the risks of a setback were bound to increase in the first half of next year. Every effort was needed to minimise the danger of a downturn, he said.

"In the foreseeable future, threats to growth remain more serious than the dangers of higher inflation, and the MPC must act forcefully," Kern said.

"If the recovery shows signs of faltering, the MPC must stand ready to increase quantitative easing by a further 50bn in the early months of 2011."

However, Stephen Boyle, head of Royal Bank of Scotland's group economics section, said: "I take encouragement from the continuing recovery, but the economy faces austerity headwinds in the new year. The monetary policy committee was right to wait and see."

The Office for National Statistics said imports hit 31.6bn in October, outstripping exports of 23.1bn, itself the highest figure since 2006.

Kern said: "The UK economy will risk stagnation and even decline without a major improvement in international trade."

Lee Hopley, chief economist at the EEF manufacturers trade body, said: "The big jump in imports comes as a surprise and reverses the trend of the past six months."