Ratesetters at the Bank of England are expected to hold interest rates at a record low of 0.5% at their final monetary policy meeting of the year.
Following stronger-than-expected economic growth and an improved performance in the manufacturing sector, the Monetary Policy Committee is also tipped to maintain the level of quantitative easing – cash pumped into the economy – at £200 billion.
But analysts predict there will still be a three-way split within the MPC – with member Andrew Sentance likely to vote for a rise in interest rates and Adam Posen expected to favour a second injection of QE.
Howard Archer, UK chief UK and European economist at IHS Global Insight, said: “The Bank of England is highly unlikely to give an early Christmas present to the economy by announcing more quantitative easing but it is equally unlikely to act like Scrooge and put interest rates up.”
Mr Archer said rates were likely to be held as economic growth was likely to slowdown in the coming year.
He added: “The Bank of England is tipped to keep interest rates at a record low 0.50% on Thursday at its final monetary policy meeting of 2010 and before an expected slowdown in economic growth.”
The City had been expecting the Bank to announce a further bout of quantitative easing, but these fears have eased over the past couple of months as the likelihood of a double-dip recession wanes. Inflation has also been stubborn, still way above the Bank’s 2% target at 3.2%.
Philip Shaw, economist at Investec, said: “We would not completely rule out the prospect of more QE. However the majority of the economic news is currently tending to come out ahead of expectations. In addition, in sharp contrast with the US, inflation is above target and rising rather than lower than desired and falling.”
The escalating debt crisis in the eurozone is also likely to be discussed at today’s MPC meeting – as struggling countries on the continent could affect the UK’s export trade.
Commenting ahead of today’s decision, David Kern, chief economist at the British Chambers of Commerce (BCC), urged the MPC not to be complacent in the face of stronger growth.