Bank vote set to be tight decision (From Herald Series)

Bank vote set to be tight decision

12:11am Thursday 7th March 2013 in National News © Press Association 2013

Bank of England rate-setters are facing a "knife-edge" decision on whether to pump more cash into the fragile UK economy.

Experts said this month's vote will be an extremely close one after minutes of February's meeting saw governor Sir Mervyn King and Paul Fisher join previously lone voice David Miles in calling for a restart to the printing presses.

But there will be little joy for savers as interest rates are expected to remain firmly at 0.5%, with the meeting marking the fourth year in a row at the emergency low level.

Many economists are not expecting rates to rise until 2015 at the earliest while Bank of England deputy governor Paul Tucker recently told MPs that he had even put negative interest rates up for consideration.

Mr Tucker admitted it was an idea that needed to be thought through carefully, although 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.

The British Chambers of Commerce (BCC) cut its forecast for growth this year and next, forecasting gross domestic product (GDP) to edge up by 0.6% in 2013 and 1.7% in 2014. It believes the UK will avoid a triple dip recession, with the economy recovering from its 0.3% contraction in the fourth quarter to grow in the first quarter - albeit by a paltry 0.1%.

David Kern, BCC chief economist, 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. In addition, we now expect GDP to return to its pre-recession levels early in 2015 and the squeeze on living standards will continue for a while longer."

Sir Mervyn favoured boosting the Bank's quantitative easing (QE) programme by another £25 billion to £400 billion last month to jump-start the recovery.

A recent shock fall in manufacturing activity in February on top of gloomy construction figures suggested others on the Monetary Policy Committee (MPC) may also be swayed to unleash more support.

But better news from the powerhouse services sector and retailers earlier this week has boosted hopes that Britain will be pulled back from the brink of a triple-dip recession. The latest Markit/CIPS purchasing managers' index showed the services rebound continued in February with the fastest rise in activity in five months. Upbeat figures from the British Retail Consortium also showed high street sales grew at their fastest rate in more than three years last month.