What the Bank has to weigh up next week

LONDON (Reuters) - The Bank of England looks set to stick with February's decision not to expand its quantitative easing programme and leave interest rates unchanged at 0.5 percent when policymakers meet next week.

Since March 2009 the central bank has bought 200 billion pounds of financial market assets, mostly gilts, with newly created money, but in February its Monetary Policy Committee was unexpectedly unanimous in not approving further purchases.

The vast majority of some 60 economists polled by Reuters this week do not expect the Bank to approve more purchases, and few see interest rates rising before the last three months of this year (r.reuters.com/xab82j).

Below are some of the main factors likely to be considered by the MPC.

ECONOMIC GROWTH

The latest figures from the Office for National Statistics shows that Britain's economy emerged from 18 months of recession faster than first thought, growing by 0.3 percent rather than 0.1 percent in the last three months of 2009.

However, the data may not change the Bank's outlook much. Earlier this month the Bank's quarterly Inflation Report showed that the central bank believed the initial estimate was an underestimate, and the new ONS figures show that the recession was deeper than previously estimated.

INFLATION

Britain's inflation jumped to 3.5 percent in January from 2.9 percent, forcing Bank Governor Mervyn King to write a public letter this month explaining why consumer prices were rising far faster than the central bank's 2 percent target.

However, King said that he expected inflation to fall rapidly to below target later this year, as the upward pressure from January 1's rise in value-added tax fades and the amount of slack in the economy drags down price growth.

FISCAL POLICY

Fiscal policy is complicating the Bank's forecasting process. Policymakers expect that fiscal policy will turn out to be tighter than currently pencilled in, whoever wins a national election expected on May 6.

The convention is to use already published plans but policymakers will probably try to get round to this by making assumptions about household spending and other factors.

(Editing by Toby Chopra)