Bank of England plans for money-boosting measures will be in sharp focus again this week when policymakers gather for their latest meeting.
Quantitative easing will be top of the agenda on both sides of the Atlantic, as the US Federal Reserve also decides on monetary policy.
But while there is growing expectation for the Fed to announce more recovery aid, many now forecast the Bank to hold off from further action in the UK after much better-than-expected third quarter growth figures.
Figures showing a 0.8 per cent rise in gross domestic product (GDP) suggested the recovery was not as weak as many believed and experts have quickly put back the calendar for any potential QE.
It is now widely expected the Bank’s Monetary Policy Committee (MPC) will keep both rates on hold at 0.5 per cent and QE at £200 billion in November.
Despite rate setter Adam Posen calling for a further £50 billion in QE during October, many believe he will not yet have gained the support of other colleagues.
The Bank will have access to its own November inflation forecast in time for the meeting, which may yet sway its decision.
But JP Morgan Chase economist Allan Monks believes the MPC will wait until the following report in February before embarking on any so-called QE2.
He said while much of the third quarter GDP growth could be put down to the temporary support from the Government and construction sectors, “nevertheless, underlying growth was firmer”.
“This looks set to create enough uncertainty about the pace of the recovery to talk the middle ground members of the MPC out of voting for more stimulus.”
He added there was also a chance that improving global growth next year could delay QE even further.
“Given that JP Morgan’s global forecast anticipates a gradual reacceleration of growth next year, and that there are a few signs in the data flow working in that direction currently, pushing the QE view back also raises the likelihood the MPC will choose not to act even when we get to February,” said Mr Monks.
But recent comments from MPC members suggest a growing consensus for QE and Bank Governor Mervyn King himself has warned against reading too much into one quarter’s growth figures.
Recent industry figures have pointed to a slowdown in the third quarter and now that the full force of the spending review has been revealed, confidence is unlikely to increase among firms.
While inflation has been enough of a concern for Andrew Sentance to call repeatedly for a quarter point increase in rates, he is predicted to remain a lone voice.
Vicky Redwood, at Capital Economics, said the Bank’s November forecast was set to show inflation continuing to undershoot target based on the current policy stance.
“We still think interest rate rises are a very long way off,” she said.
“Markets do not expect interest rates to start rising until later next year, but even this looks premature to us.”