London - The Bank of England is unlikely to revive its money-printing campaign, a Reuters poll showed on Monday, even though the British economy is teetering on the brink of another recession.
Economists in the survey attached a median 45% chance of the central bank resuming the quantitative easing programme which it suspended in November. However, policymakers are likely to pin their hopes on a new scheme to encourage bank lending for reviving the economy as the government makes deep spending cuts.
"We are going to see a continuation of difficult circumstances of growth remaining weak and inflation staying above target," said Simon Hayes at Barclays Capital.
With rates near zero, the BoE has already purchased £375bn of British government bonds - meaning approaching half of all conventional gilts belong to the central bank. On top of this exercise to push money into the economy, it has also launched a Funding for Lending Scheme (FLS), providing cheap credit to banks to encourage them to offer loans to customers.
While the benefits of the FLS are not expected to filter through to the economy until later this year, data released on Friday showed November mortgage approvals were at their highest monthly total since last January.
Banks polled for the BoE's quarterly Credit Conditions Survey said they would increase the availability of mortgages significantly in the first three months of 2013 after a record rise in the three months to December 11.
"Signs that the Funding for Lending Scheme is gaining traction hint at some economic recovery over 2013 which we judge makes a further increase in the asset purchase target less likely," said Philip Shaw at Investec.
The Bank's hands have been somewhat tied as inflation has held persistently above its 2% target and is not expected to fall below that for a long time.
But the poll of 64 economists did not foresee any interest rate rise from the record low 0.5% until July 2014 at the earliest. Only a handful of policy-watchers in the poll, taken over the past week, saw a rate rise before then.
One particularly hawkish forecaster is looking for an increase in August but there is no other prediction of higher rates in the poll before the second quarter of 2014.
Work in progress
Global regulators gave banks four more years and greater flexibility on Sunday to build up cash buffers so they can use some of their reserves to help struggling economies grow.
Bank of England Governor Mervyn King, who steps down later this year, said the new rules will give the banking system more room to finance a recovery.
King will be replaced by Canadian central bank chief Mark Carney in July, who is leaving behind an economy which weathered the global financial crisis quite well to take on one struggling to regain its footing.
UK manufacturing activity hit a 15-month high in December, a survey showed last week. However, later figures indicated Britain's dominant service sector shrank for the first time in two years, suggesting the economy as a whole slipped back into contraction in the last three months of 2012.
Britain bounced out of its second recession in four years in the third quarter of 2012, supported by London's hosting of the Olympic Games and extra working days, but it is forecast to achieve only tepid growth - if any - for some time.
This is thanks partly to the government spending cuts and tax rises to tackle the budget deficit. The economy has grown little since 2010 when a coalition of Conservatives and Liberal Democrats came to power.
Britain has struggled as the chances of recovery in the eurozone, its main trading partner, have faded further into this year. Economists are divided over whether the European Central Bank will cut its policy rate in the next few months.
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