Rates on hold until fourth quarter 2012 - Reuters poll

LONDON (Reuters) - The Bank of England will not raise interest rates from record lows of 0.5 percent until next October at the earliest but there is still only a one-in-three chance it will restart its asset purchase programme, a Reuters poll found on Wednesday.

The poll of 60 economists, taken over the past few days, gave a median 35 percent chance the BoE would increase the 200 billion pounds it has spent so far buying bonds, in line with an August 17 poll, but higher than the 30 percent in a July poll and 20 percent in June's poll.

A slowdown in key UK export markets, riots in major British cities and a stock market slump have darkened the outlook for the economy and triggered some speculation the BoE may opt to pump in more money to support growth.

"The message from the September meeting should still be that the current situation does not warrant the use of further asset purchases just yet," said Danielle Haralambous at 4cast.

"The Bank can afford to wait while there remains sufficient evidence to suggest that the economy will continue on the gradual path to recovery."

The central bank itself does not see any need for quantitative easing at the moment, MPC member Martin Weale told a newspaper on Friday, but does not rule it out and would engage in further stimulus if the economy worsened substantially.

Weale said one of the things that could trigger a need for more fiscal stimulus was if lending dried up again but figures released on Tuesday showed British lenders last month approved the highest number of mortgages since May 2010 and the BoE's preferred money supply gauge also picked up.

Weale's colleague Adam Posen told Reuters on Wednesday central banks should buy more financial assets in a last-ditch attempt to support growth.

"Further asset purchases by the G7 central banks are needed to check not just a downturn, but the lasting erosion of productive capacity and of debt sustainability," he said.

Posen has advocated that the BoE start a second round of QE for more than a year, though his views have found little favour so far with other members of the Monetary Policy Committee.

HOLD ON

This time last year economists were expecting rates would have risen to 1.0 percent by the end of September and rise 25 basis points per quarter to reach 1.75 percent by end-June 2012 but the successive rounds of disappointing growth numbers have pushed back expectations.

Rates are not seen rising until the final quarter of 2012, and then to 0.75 percent compared to a rise to 1.0 percent in an August 17 poll.

Markets have not priced in any hike until 2013 at the earliest.

None of the economists polled said the bank would raise them on September 8 -- or indeed before the end of the year. In a poll taken ahead of August's meeting 14 of 62 saw a rise by year-end and one of them now sees a cut to 0.25 percent next quarter.

"Any momentum for higher rates on the committee has been stopped in its tracks by the wave of global uncertainty," said Philip Shaw at Investec.

"At some stage the MPC will be in a position to begin to normalise the stance of monetary policy, but we now judge that this point may not arrive until early 2013."

The British economy grew a lacklustre 0.2 percent in the second quarter, the Office for National Statistics said last week, with the data coming after growth basically flatlined in the previous six months.

Economists do expect growth to pick up to a slow but steady 0.4-0.5 percent per quarter through to the end of next year.