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Pound rallies against the dollar after QE decision

Pound rallies against the dollar after QE decision Credit: Clara Molden/PA

The pound rallied back up to 1.51 US dollars after the Bank of England decision not to change the rate of quantitative easing.

The pound had earlier dipped below 1.50 against the US dollar on fears that the Bank would restart the printing presses.

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Bank of England wants 'growth at any cost'

The Bank of England will decide on whether to start another round of Quantative Easing today.

Experts say the vote on whether to pump more cash into the economy, will be extremely close.

Justin Urquhart Stewart, director at Seven Investment Management told Daybreak that the Bank of England currently has two choices, he said do they "take the risk of inflation or get some growth in there?"

Justin added: "At the moment they want growth, at any cost."

British Chamber of Commerce cuts growth forecast

The British Chambers of Commerce (BCC) has cut its forecast for growth this year and next, forecasting gross domestic product (GDP) to edge up by 0.6% in 2013 and 1.7% in 2014.

It believes the UK will avoid a triple dip recession, with the economy recovering from its 0.3% contraction in the fourth quarter to grow in the first quarter - albeit by a paltry 0.1%.

David Kern, BCC chief economist, said:

We expect quarterly growth to increase very gradually over the next two years, but it will remain modest and below-trend for some time.

In addition, we now expect GDP to return to its pre-recession levels early in 2015 and the squeeze on living standards will continue for a while longer.

QE decision 'balanced on a knife-edge'

Howard Archer, chief UK and European economist at IHS Global, said despite the cheerier economic data, the March MPC decision "looks to be balanced on a knife-edge". He said the Bank of England will most likely hold fire on more QE due to the sharp weakening of the pound.

He explained last week's drop of pound against the dollar will make QE less likely:

There is a danger that doing further QE at a time when sterling is already under serious downward pressure could cause the pound to fall too far too fast, which would be both destabilising and perhaps over-stoke inflation risks.

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Bank to vote on boosting QE 'by £25bn to £400bn'

The Bank of England will announce the decision at noon today. Credit: Press Association.

Governor of the Bank of England, Sir Mervyn King voted last month to boost the Bank's quantitative easing programme by another £25 billion to £400 billion in an attempt to jump-start the recovery. This figure is the amount likely to be discussed today.

A recent shock fall in manufacturing activity in February on top of gloomy construction figures suggested others on the Monetary Policy Committee (MPC) may also be swayed to unleash more support.

But better news from the powerhouse services sector and retailers earlier this week has boosted hopes that Britain will be pulled back from the brink of a triple-dip recession.

What is quantitative easing?

Quantitative easing (QE) is the pumping of new money into the economy by the central bank. It has been used by both the Bank of England and the Federal reserve in an attempt to revive consumer spending and economic growth.

Quantitative easing explained by the Bank of England

The Bank of England has so far committed a total of £375bn to QE. Today they will vote on whether to increase this further.

Bank of England to vote on quantitative easing

The Bank of England is due to vote whether to inject more cash into the economy in the form of quantitative easing.

The bank's monetary policy committee (MPC) will announce their decision by noon. This month's vote is expected to be very close will vote as the number of members calling for the measure appears to have increased.

Three on the MPC, including the governor Sir Mervyn King, voted to raise quantitative easing at the last meeting in February.

In depth: Business Editor Laura Kuenssberg: Did Sir Mervyn King just say something rather radical?

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