Policymakers of the Bank of England are likely to sit tight on quantitative easing even if the outgoing Governor Mervyn King insists on additional stimulus to help the economic recovery gain traction.
At the final meeting of King as governor of BoE, a majority of policymakers will possibly cite positive economic development since the last meeting as a reason to adopt a "wait and see" stance.
The Monetary Policy Committee is widely expected to retain its key interest rate at a record low 0.50 percent and the size of quantitative easing at GBP 375 billion. The announcement is due at 7.00 am ET.
King along with Paul Fisher and David Miles sought more stimulus over the last four months, but majority rejected citing impact on currency, better economic growth and risk to inflation.
At the May meeting, most members said the effects of the previous round of asset purchases were still coming through and, together with the extended Funding for Lending Scheme, should continue to boost activity.
Economists now expect to see some reforms after Mark Carney takes over as Governor in July. He is expected to initiate reforms on the interest rate path.
Giving more room for monetary policy adjustment, inflation fell to a seven-month low of 2.4 percent in April, from 2.8 percent in March. Nonetheless, the BoE estimates inflation to peak at around 3 percent in the third quarter of this year.
A weaker than expected recovery will provide the avenue for Carney to unleash more monetary activism, said Martin Beck, UK economist at Capital Economics.
The International Monetary Fund in a report welcomed the monetary policy response of BoE. In addition to considering further purchases of gilts, the lender said the central bank should provide assurance to households and investors that policy rates will be kept low until recovery reaches full momentum.
The economy dodged recession in the first quarter after gross domestic product expanded 0.3 percent. The bank forecasts the economy to expand 0.5 percent in the second quarter.
According to the recent Purchasing Managers' survey results, both services and manufacturing sectors strengthened sharply in May on new orders.
James Knightley, an economist at ING Bank NV said positive PMI data bodes well for economic activity in the months ahead and should ensure a relatively decent GDP print for the second quarter.
As such, there is little prospect of any BoE action today and it diminishes the likelihood of any shift in policy under Mark Carney in the next few months.
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