The Bank of England policymakers are unlikely to announce further quantitative easing on Thursday as they seem to think that the monetary policy has already provided enough stimulus. The decision could be weighed down by sticky inflation rather than the fact that the economy slipped back into a double-dip recession.
The nine member committee is expected to leave the size of the quantitative easing unchanged at GBP 325 billion. The previous change in asset purchases was in February, when it was raised by GBP 50 billion.
The interest rate is also seen unchanged at a historic low of 0.50 percent. The rate has been maintained at the current level since March 2009.
At the April meeting, only Adam Posen sought more stimulus, while David Miles gave up his call for QE.
Nonetheless, possibilities of another round of stimulus cannot be completely ruled out.
It is far from inconceivable that the BoE could compromise and do GBP 25 billion extra QE rather than doing the GBP 50 billion extra that it favored in both February and last October, when it restarted QE after an extended break, said IHS Global Insight's Chief UK Economist Howard Archer.
Vicky Redwood, chief UK economist at Capital Economics said even if the Monetary Policy Committee does pause this month, a decent fall in core inflation in April and further weakness in activity could put more QE back on the agenda within the next month or two.
According to Redwood, the Inflation Report is likely to show that inflation is still broadly on track to meet its target in two years' time. The report is due on May 16.
Hovering stubbornly above the 2 percent target, inflation rose to 3.5 percent in March driven by higher food and clothing prices.
The economy shrank 0.2 percent in the first quarter, entering a double-dip recession for the first time since 1970s. Economists also see a possibility of another quarter of contraction if macroeconomic numbers deteriorate, especially due to the extra day public holiday from the Queen's Diamond Jubilee.
Although the U.K. entered a recession, policymakers are likely to pin point that the economy is seeing modest underlying growth. Recently the International Monetary Fund lifted its 2012 growth forecast for the U.K. to 0.8 percent, which is same as the government estimate.
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