Calls by the Governor of the Bank of England for the Chancellor to avoid any extra fiscal stimulus in his impending Budget and to leave the Bank in the vanguard of fighting the recession are backed today by The Times Monetary Policy Committee.

After the Bank’s aggressive drive to combat the slump led it to cut interest rates to only 0.5 per cent and begin quantitative easing moves last month to “print money”, the panel also urges it to switch to a “steady as she goes” approach, keeping base rates and its broader strategy on hold this month.

The verdict from the independent Times panel echoes City expectations that, after six months of frenetic action since last October, the Bank’s Monetary Policy Committee (MPC) will stay its hand today.

But a minority of The Times MPC broke with the consensus and urged still more action to jump-start growth. They warned that, despite tentative signs of the economy emerging from the worst phase of the slump, there was no room for complacency.

Sushil Wadhwani, a former member of the Bank’s MPC, said that there was still a risk of Britain enduring a “full-blown depression”. He called for both a further halving of interest rates to 0.25 per cent and more fiscal measures through tax cuts or extra public spending.

Anatole Kaletsky, The Times’ chief economics commentator, also urged that rates be cut to zero, or just above, to remove any incentive for banks to hoard in their reserves the extra money being created through quantitative easing (QE). But Mr Kaletsky joined the rest of the Times’experts in rejecting the case for tax and spending measures in the Budget.

Panel members’ arguments against an extra fiscal boost ranged from concern that soaring government deficits made this unaffordable to worries that ministers and the Bank needed to pause to see what boost to growth existing, large-scale moves will deliver.

Sir Steve Robson, former Second Permanent Secretary to the Treasury, said that fiscal moves would “risk seriously undermining confidence in the gilts market and in sterling . . . What we need is confidence-building measures setting out in concrete terms how the Government intends to get back to fiscal and monetary stability.”

Sir Alan Budd, former chief economic adviser at the Treasury, said: “Given the considerable deterioration in the public finances . . . there is limited scope for further fiscal easing.”

Geoffrey Dicks, former UK chief economist at RBS, emphasised that “there is an awful lot of fiscal and monetary stimulus in the pipeline. We have to be patient.”

Mr Wadhwani countered that fiscal measures could be afforded: “Although the UK’s projected deficit is high, the debt-to-GDP ratio is still relatively low by international standards.”

The Times MPC largely agreed that it was “too early to tell” whether the radical QE plan was proving effective, although the panel detected some early benefits through a boost to confidence and lower market interest rates.

The Bank has completed only about £20 billion of £75 billion of planned asset purchases over three months through which it is pumping newly created money into the economy.

Some Times MPC members criticised the Bank’s implementation of QE. Sir Steve urged that the Bank should shift from buying mainly government bonds (gilts) to buying corporate debt to “attack [tight] credit conditions more directly”. So far the Bank has bought only about £400 million of corporate debt in the markets.

Mr Kaletsky said that the Bank’s management of its “reverse auctions” to buy gilts had sown market confusion. “As has been consistently demonstrated since the Northern Rock fiasco, the Bank’s technical skills in managing the financial markets leave a lot to be desired,” he said.

Bronwyn Curtis, of HSBC, said that gilts market volatility meant that the MPC must break with its normal practice when it leaves its policy unchanged and issue a statement today regardless of its decisions.

Rupert Pennant-Rea, a former Deputy Governor of the Bank, said that he was worried that too little had been done to tackle the toxic assets clogging banks’ balance sheets and more action was needed in this area.

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