Since it embarked in earnest last October on its battle to beat the slump, the Bank of England has given scant quarter in its campaign of interest rate cuts and radical measures. Mervyn King, the Bank's Governor, has insisted that its response has been the swiftest and most extensive to any downturn in its 300-year history.

Having cut interest rates from 5 per cent to 0.5 per cent in only six months, the Bank's Monetary Policy Committee (MPC) rapidly followed up with the unconventional weapon of “quantitative easing” (QE), pumping newly created money into the economy by buying up government and corporate bonds. Finally, it paused for breath in April and opted to stand pat.

Most of the City was betting last month that the MPC would extend that “wait and see” stance for another month. Yet, instead, the nine-strong committee went back on the offensive. It added an extra £50 billion to its programme of asset purchases under QE and lifted the planned total to £125 billion — the bulk of a £150 billion maximum initially authorised by the Chancellor.

As the MPC gathers again this week, the multibillion-pound question it confronts is: has it yet done enough? After a spate of indications that the recession has at least hit rock bottom, with the worst of the slump in GDP over, there is mounting City speculation that the Bank may soon call a halt to further action.

Mr King himself threw that notion into doubt a fortnight ago, when he warned that the recession would be deeper, and the road to recovery longer and harder, than the Bank had expected only in February. He said: “We may get a recovery that proves to be sustained; then again, we may not.”

The sombre tone of the Governor's prognosis has left many economists concluding that rates will be kept on hold for a protracted period and that more “printing” of money under QE, perhaps much more, is very possible.

Here is our monthly summary of the latest economic indicators that the MPC must consider as its weighs its next moves.

Growth and activity: off the bottom?

Key surveys that are closely monitored by the Bank offer increasing signs that the economy is through the worst of the recession and that the savage pace of its decline is easing off.

In the sprawling services industries, the dominant sector of the economy, the latest CIPS/Markit purchasing managers' survey showed a fifth consecutive monthly improvement in conditions during April. The poll's headline gauge of activity rose to 48.7, against a low of 40.1 reached last November, leaving it not far from the 50 mark that indicates expansion.

In manufacturing, the April CIPS survey showed the rate of contraction easing off, with a marked improvement in orders, especially export orders, suggesting that exporters have been helped by the weaker pound.

Other rosier news has come from the high street, where sales volumes in April rose by a higher-than-expected 0.9per cent. In the housing market, too, while house prices have continued to tumble, activity is on the rise.

Yet the continuing frailty of the economy was underlined by the latest GDP figures, which confirmed a 1.9per cent plunge in national income in the first quarter (Q1), the steepest since 1979. Data showed that overall consumer spending, including nonretail spending, plummeted by 1.2per cent in Q1, the biggest fall since 1980.

That came as employees' pay suffered a record 1.1 per cent fall in the quarter and as unemployment continued to soar. Numbers out of work rose by 244,000 in the three months to March, the biggest quarterly rise so far in the recession. However, the claimant count of unemployment registered a relatively small rise of 57,100 in April, well below forecasts.

Costs and prices: off the top

Worries that inflation in the UK is proving stickier than in other big economies gave way last month to anxieties over the threat of deflation.

The Bank's target consumer prices index (CPI) gauge of inflation tumbled to 2.3 per cent in April, from more than 3 per cent earlier in the year, and is set to fall still further. Even with its drastic rate cuts and QE, the Bank forecasts that it will struggle to keep inflation as high as the 2 per cent target over the next two to three years.

The more popular retail prices index (RPI) inflation measure plunged deeper into deflationary territory, dropping to an annual rate of minus 1.2 per cent in April, from minus

0.4 per cent in March. The RPI gauge is being driven down more sharply because of the impact of cheaper mortgage interest costs thanks to steep rate cuts. Mortgage costs are not included in the CPI. Nevertheless, most economists still believe that RPI inflation will rebound eventually. The weakness of the pound has boosted Britain's import bills and oil prices are resuming their upward march as the global slump bottoms out.

International economy: off colour

Despite hopes that global conditions are starting to improve, on both sides of the Atlantic, the flow of news from key economies has remained dire. Worries are especially acute over the eurozone, where Germany endured a 3.8 per cent collapse in GDP in Q1. The eurozone economy as a whole shrank by a record 2.5 per cent.

Rates verdict: Bank rate is on indefinite hold. The MPC will debate a further expansion of QE, but after last month's £50 billion increase may opt to wait a little before doing more.

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