Bank set to put £50bn into economy

The Bank's Monetary Policy Committee (MPC) is forecast to increase its quantitative easing (QE) programme by £50 billion to £325 billion on Thursday in a bid to stave off a recession, while it will also hold interest rates at record lows of 0.5%.

Many economists had previously expected the MPC to inject an even greater sum into the economy but surprisingly upbeat industry surveys for January have forced some to revise down their estimates.

The closely watched Markit/CIPS surveys showed that the manufacturing sector returned to growth in January, while the powerhouse services sector saw a record leap in optimism.

Malcolm Barr, an analyst at JP Morgan, had previously forecast an injection of £75 billion but said the "much firmer than expected" data meant he now pencilled in a £50 billion boost instead.

Alan Clarke, UK and eurozone economist at Scotiabank, said the survey data "seriously puts the cat amongst the pigeons ahead of next week's Bank of England decision".

But he added: "We have had our doubts for some time that the next QE instalment would be as big as £75 billion. Our view has been that £50 billion was a better bet."

Despite the upbeat data, most analysts also insisted it was still too early to call a recovery after respected thinktank NIESR recently warned that the UK economy would shrink by 0.1% in 2012 amid weak investment and uncertain conditions.

The economy contracted by 0.2% in the final quarter of 2011, sparking fears that the UK would fall back into another recession - defined as two successive quarters of falls - albeit a much milder one than previously.

Howard Archer, chief UK and European economist at IHS Global Insight, said: "It is far from certain that January's apparent pick-up in economic activity can be sustained and relapses remain a very real risk given still appreciable domestic and international, mainly eurozone, headwinds."