RTTNews - Thursday, the Bank of England is expected to stay pat on its key interest rate and continue with its bond purchase programme using newly created money.

At the end of two-day rate setting meeting, the Monetary Policy Committee of BoE is forecast to maintain the Bank Rate at 0.5%, the lowest since the central bank was established in 1694. The decision is due at 7.00am ET.

In the last month meeting, the BoE had decided to raise the size of the asset purchase plan by GBP 50 billion to GBP 125 billion in order to increase the amount of money in circulation. Economists now expect the MPC to continue with the asset purchase programme using central bank reserves without raising the size of unconventional measures.

The British Chambers of Commerce urged the MPC to accelerate the tempo at which they execute the asset purchase programme and to increase the scheme's size beyond GBP 125 billion.

After the British economy entered its worst recession since 1979, annual inflation slowed in April to a level last seen in January 2008. Consumer price annual inflation stood at 2.3% in April. BoE sees a slow recovery and expects inflation to stay below target in the coming few years.

Other economic indicators are now pointing towards an improvement in economic activity. According to separate surveys conducted by Nationwide Building Society in May, house prices logged the largest increase since October 2007, while consumer confidence rose to a six-month high.

The CIPS/Markit Purchasing Managers' Index for the British service sector moved above the 50-mark in May to record a growth for the first time in a year. The indicator rose to 51.7 in May. This was the sixth consecutive gain.

However, jobless claims are expected to increase in the economy. In an interview to BBC radio, David Blanchflower, a former MPC member said claims might increase around 100,000 a month for the next year or so.

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