The Bank of England will be forced to snap up an additional 50 billion pounds of UK government bonds in the stimulus programme it expanded on Thursday to 275 billion pounds, a Reuters poll of economists showed.
Grappling with an economy that has barely grown in nine months and a real economic and financial threat from the sovereign debt crisis engulfing Britain's main trading partner, the eurozone, the BoE has sprung back into action.
Two-thirds of economists polled, or 34 of 47, said the BoE would have to do even more quantitative easing (QE) to get Britain's economy back on track.
The latest Reuters poll provided a median forecast of 325 billion pounds, up significantly from the 250 billion predicted just last week.
"The latest round of QE should be seen as a response to disappointing news on economic activity as well as an insurance policy against a more serious downturn looking ahead," said Philip Shaw, economist at Investec. Shaw was one of the minority of economists who correctly predicted the BoE would say on Thursday that it was restarting its QE programme and is with the consensus in expecting the BoE to expand it to 325 billion pounds in February.
While most agree that the 200 billion pounds of gilt purchases the BoE has already made probably softened the blow of the Great Recession, there is plenty of disagreement over how effective QE is as a policy tool.
Inflation, which the BoE is mandated to hold close to a 2.0 percent target, is running at more than double that rate and is expected to top 5 percent over the next few months.
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