Bank of England to assess extra recession aid

The Bank of England will on Thursday decide whether to inject billions of extra pounds into the economy to help get it out of its longest recession on record.

While analysts widely expect the BoE to leave its key interest rate at the record-low level of 0.50 percent, question marks hang over whether the central bank will continue with a radical policy of pumping new cash into the economy.

In a major week for international monetary policy, Australia's central bank on Tuesday raised interest rates for a second month running as the US Federal Reserve met with a decision due on Wednesday.

The European Central Bank, like the BoE, meets Thursday.

The BoE has sought to combat recession with record-low interest rates and quantitative easing (QE) -- its policy of pumping new cash into the economy to help kick-start lending to businesses and individuals.

Under QE, the BoE has so far agreed to create 175 billion pounds in new cash by purchasing bonds from commercial institutions.

"With the previous extension to its QE programme now complete and the economy still stuck firmly in recession, we expect it to announce another 50 billion pounds of asset purchases over the next three months," said analysts at Capital Economics.

"And given the (Monetary Policy) Committee's record of boldness when it comes to QE, we would not rule out an even bigger amount," they said in a note to clients.

However, Investec Securities economist Philip Shaw said "there remains uncertainty over" the upcoming QE policy decision owing in part to the weakness of sterling, which has suffered in recent months from the BoE's policy.

"It is more likely that the balance of economic evidence and the weaker exchange rate will result in the MPC voting to freeze the QE target at 175 billion pounds," Shaw said.

The BoE's main task is to try and use monetary policy to keep annual inflation close to a government-set target of 2.0 percent.

Twelve-month inflation slid to 1.1 percent in September, the lowest level for five years as energy prices steadied, recent official data showed.

Britain is meanwhile in its longest recession since records began in 1955, confounding expectations for a return to growth in the third quarter.

Gross domestic product (GDP) unexpectedly slumped 0.4 percent between July and September compared with a fall of 0.6 percent in the second quarter, the Office for National Statistics announced in late October.

Economists had widely expected the country to exit recession in the third quarter with a return to growth of 0.2 percent after five quarters of shrinking GDP.

Britain has thus failed to join France, Germany, Japan and the United States in exiting recession -- defined as two consecutive quarters of negative growth.

The current recession has so far seen the economy contract 5.9 percent, very close to the downturn of the early 1980s when the total shrinkage reached 6.0 percent.