QE decision 'postponed to November'

Although Bank of England policymakers are to meet this week, the Monetary Policy Committee (MPC) is likely to defer any decision about extending the quantitative easing programme, experts have claimed.

The Bank is expected to postpone the decision on the scheme until November, when it revisits forecasts in its quarterly inflation report.

At the start of this month, assets acquired by the Bank in a bid to increase money supply stood at £160 billion.

The current value of the scheme stands at £175 billion after the MPC meeting in August saw £50 billion more pumped into the programme which is due to be completed by next month.

At the same meeting, Mervyn King, the Bank's Governor, called for more funds to be channelled into the programme. Arguing that there was less harm in boosting money supply by too much than there would be by too little, he pushed for an increase to £200 billion.

The MPC, however, has taken care to insist that QE will require time to take effect.

While the Bank will be encouraged by the UK economy's probable return to growth in the third quarter, members warned last month of "false dawns".

Vicky Redwood, UK economist at Capital Economics, said the asset purchase scheme was having an impact but had "certainly not been overwhelming".

She added it was fairly clear from the MPC that they preferred to wait until November before deciding whether to extend its QE programme again.

"October's meeting will be something of a non-event. But unless the recovery dramatically picks up pace, a further extension to QE looks probable later this year," Ms Redwood added.

This week's meeting will also see interest rates kept at their record low of 0.5%.

Howard Archer, chief UK economist at IHS Global Insight, said rates were likely to remain on hold until at least the final months of 2010.

The stimulus measures are designed to ward off a deflationary spiral, but the Bank now thinks it is less likely that its preferred inflation benchmark will fall below 1%, partly due to the diminishing chances of lower gas and electricity bills.

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