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Bank of England rate-setters are due to make their toughest decision in months.
While interest rates are all but certain to stay at their 0.5% record low, opinion is split on whether the Monetary Policy Committee (MPC) will increase its £125 billion efforts to boost the money supply.
The MPC has already been granted Treasury permission to create a further £25 billion through quantitative easing, but must give its verdict on conflicting signs over a potential recovery in the economy.
Barclays Capital economist Simon Hayes said QE was "shrouded in uncertainty" with much disagreement about its future among experts.
"Add to this the well-earned reputation of the MPC for unpredictability and financial markets are understandably nervous about Thursday's decision."
Rising house prices in July and better than expected news from manufacturing and services firms have fuelled cautious hopes of an end to recession,
Soaring stock markets have also given grounds for optimism - including a record-equalling 11 gaining sessions in a row for the FTSE 100 - while inflation is now below the committee's 2% target for the first time in almost two years.
But the MPC must also consider a worse than expected 0.8% decline in output between April and June and a record £14.7 billion fall in lending to businesses during the same period.
This underlines how continued weakness in the banking sector could yet hinder a recovery despite £6 billion in combined profits from HSBC and Barclays on Monday. Lloyds Banking Group and nationalised Northern Rock have reported losses of £4 billion and £724 million respectively.
The British Chambers of Commerce have called for QE to be lifted to £180 billion and said the economy is still "facing serious dangers" despite the positive signs.
BoE decision on quantitative easing - Yahoo! News UK
While interest rates are all but certain to stay at their 0.5% record low, opinion is split on whether the Monetary Policy Committee (MPC) will increase its £125 billion efforts to boost the money supply.
The MPC has already been granted Treasury permission to create a further £25 billion through quantitative easing, but must give its verdict on conflicting signs over a potential recovery in the economy.
Barclays Capital economist Simon Hayes said QE was "shrouded in uncertainty" with much disagreement about its future among experts.
"Add to this the well-earned reputation of the MPC for unpredictability and financial markets are understandably nervous about Thursday's decision."
Rising house prices in July and better than expected news from manufacturing and services firms have fuelled cautious hopes of an end to recession,
Soaring stock markets have also given grounds for optimism - including a record-equalling 11 gaining sessions in a row for the FTSE 100 - while inflation is now below the committee's 2% target for the first time in almost two years.
But the MPC must also consider a worse than expected 0.8% decline in output between April and June and a record £14.7 billion fall in lending to businesses during the same period.
This underlines how continued weakness in the banking sector could yet hinder a recovery despite £6 billion in combined profits from HSBC and Barclays on Monday. Lloyds Banking Group and nationalised Northern Rock have reported losses of £4 billion and £724 million respectively.
The British Chambers of Commerce have called for QE to be lifted to £180 billion and said the economy is still "facing serious dangers" despite the positive signs.
BoE decision on quantitative easing - Yahoo! News UK
