The Bank of England (BoE) is likely to slash its growth and inflation forecasts for 2012 and beyond today, fuelling expectations of yet more money-printing later this year to boost the struggling economy.
Britain is languishing back in recession as government spending cuts, the Eurozone debt crisis, bad weather and one-off factors including an extended break for the queen's Diamond Jubilee celebrations weigh.
That will all be grist to the mill for central bank governor Mervyn King to extend a recent unbroken run of gloomy economic diagnoses when he presents the BoE's quarterly inflation report to the media - and fields likely questions about whether or when the bank might cut already ultra-low interest rates.
With inflation having fallen faster than expected, markets have also started speculating whether the central bank will announce extra bond purchases before it is done with the current round in November.
The Bank resumed its asset buying last month, launching a four-month, £50bn programme with newly created money to keep a lid on borrowing costs and pump more cash into the economy.
Since then, figures have shown Britain's recession is deeper than thought, with little sign of a hoped-for bounce in activity in July or a boost from the Olympic Games the country is currently hosting.
The central bank report was likely to flag further easing, Nomura economist Philip Rush said.
"Mervyn King's usual dovish overlay will probably compound expectations that the Monetary Policy Committee remains firmly in fire-fighting mode," he said.
City A.M. Reporter