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Bank of England still cautious on economic recovery

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The Bank of England has left itself the option of pumping more money into the economy should the recovery begin to falter next year.

Minutes of the December meeting of the Bank’s rate-setting Monetary Policy Committee (MPC) suggested lingering and serious doubts about the ability of the UK economy to haul itself from the deepest recession in decades.

The MPC expressed worries that a new surge of volatility in the world’s financial markets could jeopardise the recovery.

Although the economy was showing signs of improvement, the MPC also identified continuing frailties.

As a result, the committee voted to maintain a watching brief on the quantitative easing strategy which is due to end in February.

The MPC minutes noted stronger business investment and consumption as evidence that economic conditions were improving.

However, the real issue was prospects for the medium term when the UK economy will have to depend less on consumer and public spending and more on exports. There is, however, the minutes suggested, little evidence of this trend yet emerging.