What the Bank has to weigh up

LONDON (Reuters) - The Bank of England looks set to leave interest rates at a record low of 0.5 percent next week and conclude that it is too early to tamper with its quantitative easing programme.

The central bank wrote a new chapter in monetary history last month when it announced it would buy 75 billion pounds of assets with newly-created money in a bid to kick-start economic growth.

Bank Governor Mervyn King told MPs last week that the programme could be scaled back if it enjoyed early success. However, no such verdict is likely just one month into the programme, particularly when money supply figures for March have yet to be released, and the target is likely to remain unchanged.

Here are some key points likely to feature in the Monetary Policy Committee's decisions.

DEPTH OF RECESSION

Britain's economy contracted by 1.6 percent in the fourth quarter and figures for the first three months of this year are likely to be similarly grim.

Forward-looking indicators suggest the pace of contraction may be easing but no return to growth is expected until the end of the year at the earliest. Most economists reckon the economy will contract by more than 3 percent in 2009 in what would be its worst performance since the Second World War.

INFLATION

Inflation unexpectedly rose to 3.2 percent in February, more than a full percentage point above target, as the weaker pound pushed up the price of imports.