Bank of EnglandFears of a triple-dip recession will loom large for Bank of England policymakers after a gloomy start to the year for the economy.

Despite the continuing uncertainty, the Bank's nine-strong Monetary Policy Committee (MPC) is expected to remain in "wait and see" mode this month and potentially some months to come.


Economists predict interest rates will be held at 0.5% for the foreseeable future, while the Bank is not expected to consider more economy-boosting measures under its quantitative easing (QE) programme until the path for the economy becomes more certain.

Many pundits think gross domestic product (GDP) slipped back into the red in the final quarter of 2012 following figures suggesting the dominant services sector contracted in December for the first time in two years.

With manufacturing the only bright spot so far in December after Markit/CIPS survey data also pointed to a poor performance from the construction industry, many experts hold out little hope for growth and fear the new year will bring scant economic respite.

A narrowing of the UK's trade deficit to £3.5 billion in November also failed to calm fears as economists said there needed to be a far bigger improvement in December to prevent net trade dragging on GDP in the fourth quarter.

America's recent fiscal cliff deal to avoid automatic tax hikes and spending cuts has provided some relief for the wider global economy, while the recent easing of eurozone sovereign debt tensions has likewise improved the outlook.

The Bank will also have to weigh up the encouraging early results of the Funding for Lending scheme to boost the flow of credit.

Mortgage approvals to home buyers climbed to a 10-month high in November, according to the Bank, while its recent credit conditions report also showed that lenders expect to "significantly" increase the availability of finance to households and borrowers this year.

But inflation is expected to cause a headache for policymakers, after the consumer prices index leapt to 2.7% from 2.2% in September amid signs it will pass 3% in the next few months as energy bill hikes take effect.