Bank of England expected to put QE plans on hold as inflation fears loom

LONDON — Britain’s economy shrank more than expected at the end of 2012 with a North Sea oil production slump, lower factory output and a hangover from London’s Olympics pushing it perilously close to a “triple-dip” recession. The country’s gross domestic product fell 0.3% in the fourth quarter, the Office for National Statistics said on Friday, sharper than a 0.1% decline forecast by analysts.

Inflation is well above target - and well above where the Bank of England and others expected it to be not very long ago. That much we know. The big question is: should we worry?

The Bank of England will keep interest rates at a record low 0.50 percent and opt against expanding its stimulus plans until the new year despite ongoing eurozone turmoil, analysts said.The BoE's Monetary Policy Committee (MPC) begins a two-day meet on Wednesday amid fears over the impact of the eurozone debt crisis on the flagging British economy, which is also buckling under state austerity and high inflation.