Launch of QEII looms ever larger in City eyes

EXPECTATIONS that the Bank of England will soon be forced to press the button on further quantitative easing have increased among City economists, in the face of a raft of depressing economic data.

A poll of 60 economists, taken by news agency Reuters over the past week but published yesterday, showed a median 40 per cent chance the Bank will have to start buying government bonds again, despite fears inflation will remain above its 2 per cent target until 2013 at the earliest.

In a similar study two weeks ago, economists gave a 35 per cent chance of a second round of QE. In early August, that consensus was 30 per cent.

Chris Crowe at Barclays Capital said: “The drumbeat for QE is growing louder as the economic outlook darkens.”

The survey also found that economists have recently slashed forecasts for 2012 economic growth, based on a recent run of poor data, the spiralling debt crisis in the eurozone, and the slowdown in the US.

Official data yesterday also showed that the number of Britons out of work has risen by its biggest amount in two years, adding to the increasingly gloomy economic picture.

Economists have pushed back their forecasts for an interest rate hike until at least 2013, later than the fourth quarter 2012 hike seen in a poll taken just two weeks ago.

The most recent survey also produced odds of a 30 per cent chance that Britain will slide back into recession.