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How will the MPC react to volatile UK economic indicators?

As we approach the next MPC meeting, scheduled for tomorrow, there is some speculation regarding the potential decision which the committee will come to. While it is highly unlikely that UK base rates will increase in the short to medium term there is an opportunity to reengage the quantitative easing program which grabbed the headlines so many months ago now. However, what would this mean about the Bank of England's opinion of the UK government's emergency budget?

There is no doubt that some in the political arena and the economic arena will look to cause friction between the Bank of England, the MPC and the government, at this moment in time all parties are singing from the same hymnbook. The truth is that the UK government was forced into budget cuts and tax increases although there is some debate as to whether the timing is the best for the UK economy.

In many ways the government, the Bank of England and the MPC are damned if they do and damned if they don't ahead of a real recovery in the UK economy. However, it will be interesting to see the release of the minutes next month which should cast further light on tomorrow's eventual decision.

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