Bank of England to hold fire on bond buys, more to come later

LONDON (Reuters) - The Bank of England looks set to stick to its current stimulus plan for Britain's ailing economy on Thursday, with policymakers anxious to assess the impact of other recent actions first.

However, the shock slump in the manufacturing sector in July raised the outside chance that the central bankers might see the need for a quick extra boost through a higher dose of quantitative easing for an economy sinking deeper into recession.

And more stimulus later this year seems a done deal for BoE watchers, after the economy's 0.7 percent decline in the second quarter underscored that it needs all the support it can get.

"We do not expect the Monetary Policy Committee to expand their monetary stimulus at the August meeting," said BNP Paribas economist David Tinsley.

"But this meeting is not a boring one and there is an active debate that the MPC need to have on whether still more stimulus could and should be announced ahead of November," he added.

All economists polled by Reuters last week expected the central bank's decision, due at 1100 GMT, to show an unchanged target of 375 billion pounds ($585 billion) of asset purchases with newly created money to be conducted by November and base interest rates held steady at a record low of 0.5 percent.

The central bankers already debated a higher dose of 75 billion pounds in July, though two of the nine policymakers voted against the decision to extend asset purchases by 50 billion pounds to 375 billion.

Ben Broadbent and Spencer Dale wanted to see how the other new schemes to get credit flowing in the economy worked first.

Britain has not recovered the output lost during the 2008-2009 financial crisis and the central bank is carrying the burden of reviving the economy as the government's hands are tied by its pledge to erase a huge budget deficit.

And the recent slew of grim reports from the economy has led more economists to expect further easing steps.

Morgan Stanley's analysts changed their view on Wednesday, predicting now 100 billion pounds more in asset buys and a rate cut as they are now forecasting the overall economy to shrink by 0.5 percent in 2012.

With the euro zone debt crisis one of the main drags on the economy, Britain may get a boost from another source on Thursday if the European Central Bank lives up to expectations and resumes buying Spanish and Italian bonds.

With no change in British policy on the cards, attention at home will quickly turn to growth and inflation forecasts that governor Mervyn King will present on August 8.

($1 = 0.6415 British pounds)

(Editing by Toby Chopra)

Source: http://news.yahoo.com/bank-england-hold-fire-bond-buys-more-come-001134266--business.html

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