Bank set to decide on 'no change'

Mark CarneyThe Bank of England is widely expected to maintain its status quo on monetary support for the UK economy when it holds its first interest rate meeting under new governor Mark Carney.

A slew of positive data this week showing an improving picture is likely to have dispelled any immediate pressure to increase its £375 billion quantitative easing (QE) programme.

With the recovery apparently gaining traction, predictions that Mr Carney will adopt an activist stance towards monetary policy may remain untested for now. Interest rates are also expected to be held at 0.5%.

Despite his much-vaunted "rock star" reputation, the new Bank boss may think it a wiser course to agree with fellow policymakers on sticking to a steady course for the time being. If not, he risks deploying his famous charisma only to be outvoted by other members of the nine-strong Monetary Policy Committee (MPC) - who repeatedly thwarted predecessor Sir Mervyn King's efforts to boost QE by £25 billion during his final months, as five times he was defeated by a 6-3 majority.
Despite his aim to achieve "escape velocity" for the economy, it is thought that Mr Carney will not want to go out on a limb and face a defeat just four days into the job.

Sir Mervyn pointed out last week that while his Canadian successor may be more "persuasive", he only holds one vote on the MPC.

The recent pick-up in the economy has given Mr Carney some breathing space from taking urgent action, with growth of 0.3% in the third quarter and 0.5% expected in the second quarter.

This week a hat-trick of positive monthly data showing growth in services, manufacturing and construction sectors are also likely to have weakened the case for any immediate further dose of QE.

Meanwhile, recent revisions by the Office for National Statistics (ONS) meant that the double-dip recession at the end of 2011 and first half of 2012 was erased from history, adding to the positive mood.

But the revised data dealt an unexpected blow when they revealed that the initial recession following the financial crisis was far worse than first feared, meaning the economy is now even further behind its pre-crisis level. GDP is now 3.9% lower than its peak in the first quarter of 2008 - where previously it was estimated to be 2.6% below, according to the ONS.