The Bank of England is keeping its powder dry. That was the unspoken message from Threadneedle Street following the meeting of the Bank's monetary policy committee, which left interest rates on hold at 0.5% and did not announce any further injections of electronic money into the economy.
When the minutes of the meeting are released, however, they are likely to show that a further dose of QE is firmly on the Bank's agenda, and it is purely a matter of when, not if.
We know this because the Bank signalled that it would need to do more to boost spending in the economy when it published its latest inflation report last month. The best guess of the MPC is that inflation will fall below its 2% target over the next two years unless there is additional stimulus.
Some analysts said the Bank's analysis meant there was no point in delay. If, they said, Threadneedle Street knew it would have to do more QE, then why not get on and do it now? It is likely that view was indeed floated at the MPC meeting, although we will not know for sure until the minutes come out.
The argument against acting immediately is that the Bank is currently part-way through the £75bn programme of QE announced in October. That will not be completed until February, by which time the Bank will have completed its quarterly forecasts and the MPC will have a clearer view of the state of the economy.
There is a chance that the Bank will surprise the markets and move next month, but it would probably require a catastrophic eurozone summit, a financial collapse or a run of extremely weak UK data to prompt such action. Otherwise, pencil in February 2012 for the next big move.
