LONDON: The Bank of England may announce a return to exceptional stimulus measures Thursday as Britain's economy manages only a weak recovery and with interest rates already at record-low levels, analysts said.
The central bank's Monetary Policy Committee (MPC) is widely expected to keep borrowing costs at a record low 0.50 percent at a two-day meeting starting on Wednesday but analysts said more quantitative easing (QE) could occur.
The BoE's key interest rate has stood at 0.50 percent since March 2009, when it also decided to begin injecting £200 billion ($308 billion, 233 billion euros) into the economy under the policy widely known as QE.
Philip Shaw, an economist at Investec Securities, said he expected the central bank to increase QE by £50 billion on Thursday after holding the level at £200 billion since early 2010.
He said the situation "calls for action now rather than later" because there was a danger that the supply of credit would be "choked off" by the eurozone debt crisis.
Other experts said the BoE would likely wait until its November meeting to pump out more new money.
"As the Monetary Policy Committee sit down to their October meeting on Wednesday, it now looks to be only a matter of when -- rather than will -- the Bank of England engage in further quantitative easing to try and help the ailing economy?" said Howard Archer, chief European economist at IHS Global Insight consultants.
"We believe it is touch and go whether the Bank of England announces a further £50 billion of QE on Thursday and we expect them to act by November at the latest. This will take the total up to £250 billion."
Under QE, a central bank pumps out new cash by purchasing assets such as government and corporate bonds in a bid to encourage lending and in turn boost economic activity.
Experts claim that while QE can help to kick-start an economy, it also threatens to fuel inflation, which in the long run can actually hinder growth.
With British annual inflation currently at 4.5 percent -- far above the BoE's 2.0 percent target -- the MPC faces a tricky balancing act.
Archer meanwhile predicted that the BoE was unlikely to cut its key interest rate to below 0.50 percent in a bid to boost growth without introducing more QE.
"Given that the MPC did not do this even at the height of the 2008-09 recession, we very much doubt that it will do so now.
"The MPC has been reluctant in the past to take interest rates down any lower than 0.50 percent because of the negative repercussions that this could have on the banking sector and banks' willingness and ability to lend."
Britain hauled itself out of a record-length recession in late 2009 but its recovery has been severely constrained by the impact of collapsing consumer confidence, painful state austerity cuts and the raging eurozone debt crisis.
Analysts are predicting that the European Central Bank could cut its key interest rate on Thursday despite high eurozone inflation in an effort to spur growth across the 17-nation bloc.
At its September meeting, the Bank of England's nine-strong MPC panel voted unanimously to hold rates unchanged but lone policymaker Adam Posen called to increase QE by £50 billion.
Since then, global stock markets have plunged and the economic outlook has darkened on heightened fears of a Greek default and evidence that the global economic slowdown is spreading to China.
The British stock market has just suffered the worst quarter of trading since the dotcom bubble burst in 2001.
The main FTSE 100 index tumbled 13.7 percent in the three months to September, wiping out an estimated £212 billion of the value of the country's top blue-chip companies.
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