10:11am Sunday 3rd March 2013
© Press Association 2014
The Bank of England will be under pressure to unleash further emergency measures this week amid signs the UK is on course for an unprecedented triple-dip recession.
A shock fall in manufacturing activity in February helped shorten odds that the Bank's nine-strong Monetary Policy Committee (MPC) will push the button on a further £25 billion of quantitative easing (QE) - also known as money printing - when they meet on Wednesday and Thursday.
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 unchanged at 0.5% 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 and eurozone economist at Scotiabank, said: "The recent noises from MPC members suggest that the MPC want to do something, but it is not yet clear what. The default policy tool has tended to be more QE and a £25 billion expansion at this week's meeting seems to be the most likely outcome."
But Howard Archer, chief UK and European economist at IHS Global, said he thought the Bank would hold fire on more QE at its March meeting, partly because the recent sharp weakening of the pound was stimulative in itself.
He said: "Furthermore, there is a danger that doing further QE at a time when sterling is already under serious downward pressure could cause the pound to fall too far too fast which would be both destabilising and perhaps over-stoke inflation risks."
On Friday the pound dropped below 1.50 US dollars for the first time in more than two-and-a-half years.
Philip Shaw, chief economist at Investec, said that while he thought it was likely the MPC would keep policy on hold, the weak figures gave the case for further QE "a certain degree of extra momentum".
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