Bank Holds Off On More Economic Stimulus
The Bank of England's Monetary Policy Committee (MPC) has voted not to pump billions of pounds more into the UK economy, despite fears of weak growth.
In what was likely to have been a close decision on extending quantitative easing (QE) after a 6-3 split among the nine-member MPC the previous month, the bank also held the base rate of interest rate at 0.5% - keeping it at a historic low for four years.
The QE programme, which currently stands at £375bn, was likely to have been kept on hold because of signs of growing activity in the main service sector of the UK economy.
Pressure for more action came amid signs that the Bank of England's flagship Funding for Lending scheme was so far struggling to encourage banks to lend more to households and businesses.
There were also disappointing snapshots of output in the manufacturing and construction sectors.
Nevertheless, there is a growing chorus among economists that the UK will avoid a triple-dip recession.
The British Chambers of Commerce (BCC) allied itself to that view in its latest economic forecast, despite cutting its estimate for GDP output to just 0.6% for 2013.
It now expects the economy to recover from its 0.3% contraction in the fourth quarter and grow in the current quarter - albeit by a paltry 0.1%.
BCC chief economist David Kern said: "We expect quarterly growth to increase very gradually over the next two years, but it will remain modest and below-trend for some time."
The flat-lining performance leaves Chancellor George Osborne under pressure ahead of his Budget statement to MPs on March 20. But his handling of the economy has been further backed by the Prime Minister, who has dismissed calls for a borrowing-fuelled spending drive, warning it would leave families facing devastating interest rate hikes.
While the Government is facing intense political pressure to change course and invest in the recovery, there remains scope for the Bank of England to act in support of growth.
Deputy Governor Paul Tucker recently told MPs that he had even put negative interest rates up for consideration as part of efforts to kick-start the recovery.
Others are worried about the prospect of more QE.
Howard Archer, chief UK and European economist at IHS Global, said it risked weakening the pound further.
"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," he said.
:: The European Central Bank kept its core interest rate for the euro area at 0.75% for the eighth successive month.