The chances the Bank of England will extend its quantitative easing programme now rest on a knife-edge, according to a Reuters poll of economists who were evenly split on the subject. The survey of around 60 analysts showed quarter-on-quarter growth languishing between 0.3 percent and 0.5 percent in each quarter through to mid-2012 -- a far cry from the nine-year high of 1.2 percent seen in the second quarter. With the UK government due to detail vast budget cuts next week, economists are increasingly looking to the Bank of England (BoE) to support the recovery as the state's share of the economy declines.
Half of the 22 respondents who answered an extra question said the Bank would announce more quantitative easing (QE), a scheme designed to boost economies with newly created money from central bank purchases of assets like government bonds. Similarly faced with mediocre growth prospects in the United States, Federal Reserve policymakers look almost certain to announce a second round of QE in November, while in Japan officials have already promised to pump more money into the economy. Of those who said the BoE would follow suit -- a position adopted by few economists until recently -- many earmarked the fourth quarter of this year. "The UK economy is close to a potential tipping point," said John Hawksworth of PricewaterhouseCoopers. "In our main scenario, the recent moderation of growth would continue but would not tip us back into negative growth. In this case, the MPC may narrowly avoid the need to resume QE and interest rates could start to edge up later next year."
Economists gave a median 30 percent chance of a "double dip" return to recession, up from 22.5 percent, and double the chances forecast for a double-dip in the United States. Britain's economy is expected to grow an average 1.6 percent this year and 1.8 percent next year, the poll showed, far below a pre-recession average of almost 3 percent per year. "It already is apparent that the second quarter will be as good as it gets for the economy for some time to come," said Howard Archer of IHS Global Insight. Sharp house price falls reported in September raised concerns among economists about the property market, among the biggest wealth generators for Britons over the last 15 years. Economists who forecast more QE from the BoE gave a median figure of around 60 billion pounds.