LONDON (Reuters) - Britain’s economy will fare slightly better than previously thought this year, reducing the chance of more asset purchases by the Bank of England, a Reuters poll found on Tuesday.
The poll of 61 economists, taken in the past week, predicted growth of 0.8 percent this year, a marginal improvement on the 0.7 percent forecast in an April poll and quashing fears of an unprecedented triple-dip recession.
Official preliminary data released after the April poll showed the economy grew a better-than-expected 0.3 percent in the first three months of the year and surveys have pointed to a solid start to the second quarter.
Having flatlined over most of the last two years, the economy is expected to grow between 0.2 and 0.4 percent per quarter through to the middle of 2014.
That improvement prompted economists as a whole to trim expectations the Bank of England will fire up its asset-buying quantitative easing programme again this year. They were at a median 53 percent, down from 55 in a May 2 poll and the 60 percent seen in last month’s economic poll.
“Given our forecasts for a gradual recovery going forward and inflation above target for the coming two years, we have lowered the probability for more QE,” said Slavena Nazarova, economist at CA-CIB.
So far the Bank has printed 375 billion pounds through its bond purchases, and economists, by the narrowest of margins, expect one more round to bring the total to 400 billion pounds.
Bank Governor Mervyn King, who since February has been in the minority on the nine-strong Monetary Policy Committee (MPC) calling for an expansion, steps down at the end of next month and will be replaced by Canadian Mark Carney, whose enthusiasm for bond purchases is uncertain.
The Bank will release its latest Quarterly Inflation Report on Wednesday. It is expected to show GDP projections held steady but to have downward revisions on inflation.
With inflation running at 2.8 percent in March, well above the central bank’s two percent target, the majority on the MPC have been concerned inflation is not falling enough to allow more stimulus. Tuesday’s poll showed it would only fall slowly, dropping to 2.4 percent early next year and to 2.3 percent in the final quarter of 2014.
Interest rates have been at a record low of 0.5 percent since March 2009 and the poll does not show any movement until 2015 at least, the end of the forecast horizon.
“With inflation still well above target, we see little immediate case for more QE but equally we are still a long way from an interest rate increase ... until the recovery is much more secure,” said John Hawksworth, chief UK economist at PwC.