Bank of America Merrill Lynch - "After the more dovish-than-expected 6-3 vote to leave QE on hold in February, the BoE’s decision in March could be finely balanced, in our view. The economic outlook has changed little over the last month: stronger labour market data, small upward GDP revisions and the circa 2% fall in GBP could offer a little more support ahead, but the inconclusive election in Italy clearly poses downside risks.
The BoE have noted before that they did not see QE as a “fine tuning” exercise – thus weighing against re-starting QE again for only small amounts (eg £25bn). However, BoE member Paul Fisher recently highlighted the view that QE could be used just to help keep the wheels of the economy turning, rather than solely to inject significant stimulus at times of acute weakness. That more-benign role for
QE could suggest a lower hurdle to re-starting the programme. In addition, there are risks that the BoE’s more dovish vote in February also marked the direction of travel for other members too.
Nevertheless, we see little fundamental reason for BoE members to change their votes from February, and indeed expanding QE further in March would be doing so against the highest medium-term in flation outlook since QE began in early 2009. As such, our central expectation is that the BoE remain on hold, though there is clearly a distinct possibility that they could expand QE by another £25bn"