In the latest hint to the outlook for monetary policy in the United Kingdom, Chancellor of the Exchequer George Osborne revived expectations in the market for a surprise move from the BoE as soon as this week.

As the MPC start their two day meeting today, Osborne said in a speech last night to Lloyd's of London that the five-year austerity program, the biggest since WWII, is flexible enough to stand in the face of economic shocks and provide the space for the Bank of England to practice monetary activism that shall keep borrowing costs low to stimulate the recovery.

With the slowing recovery and worsening economic conditions, the bets haven been on the rise that the BoE will move faster and expand its bond buying program, and the signal from Osborne was a certain blessing to markets as Mervyn King will need his permission to announce a move. The expectations have been for steady rates and APF tomorrow yet now room for a surprise has been confirmed to the market and certainly increasing since the two arch hawks ended their calls for monetary tightening and 25 bp rate increase last month.