Another emergency boost to economy likely – but not until February

FURTHER emergency support for the economy is on the cards, according to minutes of a Bank of England meeting, but it is likely that no action will be taken before February.

The nine-strong Monetary Policy Committee (MPC) voted unanimously in favour of holding the level of quantitative easing (QE) at £275 billion this month, following October’s decision to inject a further £75bn into the economy.

While some members said threats to the recovery – such as eurozone debt crisis – could warrant another round of QE in due course, the committee saw “little merit in fine tuning” at this stage.

The MPC, which also voted to hold interest rates at historic lows of 0.5 per cent, said October’s QE boost would take a further three months to complete and it would be difficult for the markets to cope with a further increase within this period. Vicky Redwood, chief UK economist at Capital Economics, said the minutes suggested the MPC would boost QE – but not until February.

The minutes are published a week after the Bank revealed its quarterly inflation report, in which it forecast a heightened risk of a double-dip recession and paved the way for another bout of QE.

The worsened prospects for the UK economy mean inflation is likely to fall far quicker than previously estimated, hitting the government’s 2 per cent target next year before falling to as low as 1.3 per cent in 2013.