The Bank of England won't raise interest rates from a record low until October at the earliest but it is done with its quantitative easing bond purchase programme, a Reuters poll of over 60 analysts found.
The survey, taken Jan 26-28 found all 66 analysts saying the bank would leave rates at just 0.5 percent when it meets on Feb. 4 and medians do not see rates rising until the fourth quarter when they would be nudged up to 1.0 percent.
Economists polled were also virtually unanimous — with only two dissenters — in expecting the central bank to leave its bond purchase programme at the most recent cap of 200 billion pounds ($325 billion) when it meets next week.
Scant few see the bank extending its quantitative easing (QE) programme, which it launched last March to rescue an economy that had plunged into recession. That comes despite news on Tuesday that it barely crawled out of recession in Q4.
But there were more who said it might be extended than in last month's poll. Five of 60 saw the bank extending QE.
"It may be a closer run thing than would have been the case without the disappointing GDP numbers and it does point to at most only a very modest rise in interest rates by the end of 2010," said John Hawksworth at PricewaterhouseCoopers. Britain crawled out of its longest recession since the Second World War last quarter at a much slower pace than had been expected. Tuesday's data showed the economy grew just 0.1 percent compared to the 0.4 percent expected.
The Monetary Policy Committee is expected to raise Bank Rate to 1.0 percent in the fourth quarter, to 1.5 percent in the first three months of 2011 and then to 1.75 percent in the second quarter, in line with a poll taken last week.
Forty-nine of 66 analysts see a policy rate rise by the end of the year compared to 47 of 59 in a December poll.
"The outlook for rates is unusually uncertain. We are still of the view that there will be a relatively early hike but that the MPC will pause at some point to gauge the effects from fiscal policy," said Philip Shaw at Investec.
"However it is feasible to see a situation where the committee is uncertain about growth prospects and delays tightening for a considerable period."
Median forecasts from the poll also showed an increasing likelihood of a hung parliament when Britain goes to the polls this year, leaving no one party in overall control.
That could prompt credit ratings downgrades, a further slump in the currency and a spike in bond yields, making it even harder for the next government to tackle the huge budget deficit.
The Labour government had been banking on a strong bounce back to growth to give it a boost in opinion polls ahead of an election that it must hold by June.
"The prospect for a hung parliament has definitely increased," said RBS economist Ross Walker. "That has already undermined markets. They don't like uncertainty."
The economy shrank by 4.8 percent last year — the worst yearly performance since records began in 1949 — and economists see it growing 1.2 percent this year and 2.1 percent next.
MPC member Andrew Sentance said on Wednesday the economy was facing opposing pressures and that the BoE may find it hard to keep inflation on target.
Base effects from oil prices are seen driving inflation to average 2.4 percent this year, above the bank's 2.0 percent target but slipping back to 1.6 percent in 2011.
