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Bank of England to leave stimulus unchanged for now

By Sven Egenter

LONDON, Oct 4 (Reuters) - The Bank of England will shy away from increasing its economic stimulus programme of government bond purchases on Thursday as the economy is showing some signs of growing again.

But another cash injection later this year remains a safe bet in the eyes of many economists because the recovery looks feeble, government spending cuts continue to weigh, and the dangers from the unresolved euro zone crisis loom large.

Britain probably exited recession in the third quarter as production bounced back from the effect of an extra public holiday in June and as ticket sales for the London Olympics boosted growth.

Some Monetary Policy Committee (MPC) members have also voiced confidence that their new Funding for Lending Scheme, aimed at getting credit flowing through the economy, will help support the recovery.

All but one of 59 economists polled by Reuters forecast an unchanged total for the quantitative easing (QE) stimulus programme of 375 billion pounds.

They all predicted that the bank would keep its benchmark interest rate at a record-low 0.5 percent after the two-day meeting.

"Although one MPC member was close to voting for additional QE in September, we expect the majority of the committee to be content to allow the current purchase programme to run its course before announcing an extension," Barclays economist Chris Crowe said.

The decision is due at 1100 GMT, but the central bank will not disclose the policymakers' discussions until the release of the minutes of the meeting on Oct. 17.

Most analysts see more bond buys with newly created money once the current 50 billion pound round of easing is completed in November, when the bank's quarterly inflation report provides the rate-setters with new growth and inflation forecasts.

"Global economic prospects have clearly deteriorated, with further signs of slowing in Asia and Europe," Crowe said. "We are fairly confident in forecasting an additional 50 billion pounds in QE will be announced at the November meeting."

A slew of weak business surveys have highlighted the fragility of the latest recovery, and the scheme to get credit flowing has yet to prove its worth.

The BoE rate-setters may also want to see if the European Central Bank's pledge to buy Spanish and Italian government bonds to calm the euro zone turmoil will help stabilise Britain's largest export market and the banking industry.

(Editing by Hugh Lawson)

((sven-markus.egenter@thomsonreuters.com)(+44 20 7542 7708)(Reuters Messaging: sven-markus.egenter.thomsonreuters.com@reuters.net))

Keywords: BRITAIN BOE/