Instant view - Bank keeps QE target steady at £275 billion

LONDON (Reuters) - The Bank of England stopped short on Thursday of announcing an expansion to its existing 275 billion pound quantitative easing programme to prop up Britain's fragile economy.

The Bank's Monetary Policy Committee also kept interest rates at a record low of 0.5 percent, where they have been since March 2009.

Following are economists' reactions to the decision.

CHRIS WILLIAMSON, MARKIT

"The most likely scenario still seems to be that the MPC will vote to increase the size of its asset purchase programme by another 50-75 billion pounds at its February meeting, after the current round of QE is completed, but anticipating the next move has become increasingly difficult in recent weeks."

"The big uncertainty is whether the surprise improvement in the business surveys will last, as concerns about weak growth are likely to outweigh inflation worries among policymakers. Much will therefore depend on how events in the eurozone unfold in coming months.

"Today's successful Spanish bond auction may help to boost confidence in the euro area's prospects, but the outlook for the region remains highly uncertain and the direction of UK monetary policy will probably be guided more by the situation in the single currency area than anything else."

PHILIP SHAW, INVESTEC

"Overall 50 billion pounds more QE next month seems to us to be virtually 'baked in the cake'. Moreover steep declines in inflation should facilitate a further 50 billion pounds of asset purchases in May, taking the QE target to 375 billion pounds. We continue to view this as the final instalment of the Bank's asset purchases, but they could be maintained for longer if the recession becomes more entrenched than we expect."

PHILIP RUSH, NOMURA

"With only one month left to go, there had been some calls for clarity about the scale of purchases it intends to pursue later. It remains a close call between an extra 50 billion pounds and 75 billion pounds being announced in February and on balance we still expect 50 billion pounds.

"Clarity sooner would have come in a poisoned chalice though. We think the MPC is loathe to pre-commit at the best of times and with so much uncertainty about the outlook, it was more likely to land badly if it had jumped earlier.

"At present, the data are recovering and the euro area sovereign debt crisis is taking a breather.

"But the new asymmetric reaction function suggests to us the Bank will plough on, albeit at a slightly slower pace, much as it did in the first round of quantitative easing.

"If things deteriorate again over the next month then the MPC will be glad it held off when it unveils a slightly greater scale of purchases than appear necessary at the moment."

HOWARD ARCHER, IHS GLOBAL INSIGHT

"No surprise with no policy action from the Bank of England this month. But BoE action looks odds-on in February with another 50 billion pounds of Quantitative Easing the most likely outcome. The minutes of the January MPC meeting are likely to reveal ongoing serious concerns within the MPC over growth prospects and open the door wide to further QE in February.

"The MPC had indicated that it was likely to sit tight in January given that last October's 75 billion pound extension to the Quantitative Easing programme runs through to early February. The MPC is concerned that market capacity makes "it difficult to increase the monthly rate of asset purchases substantially above that already under way."

"Meanwhile delaying further policy action until February gives the committee time to hopefully see further retreats in inflation measures which would be helpful for BoE credibility in taking further stimulative action.

"Given the overall impression that the economy is currently struggling to grow in the face of serious domestic and international (particularly from the euro zone) headwinds, the worrying and uncertain outlook, and probable markedly retreating consumer price inflation over the coming months, we believe that it is odds-on that the MPC will pull the QE trigger again in February most likely with a 50 billion pound bullet."

IAN MCCAFFERTY, CHIEF ECONOMIC ADVISER OF BUSINESS LOBBY CBI

"Today's decision by the MPC to leave monetary policy unchanged was expected, since the current round of asset purchases is not yet complete.

"But with economic conditions fragile and inflation expected to undershoot, the MPC appears to be signalling that a further extension of the asset purchase programme is likely in the months ahead."

(Reporting by UK Economics Desk)