The Bank of England decided not to restart its main stimulus programme for Britain’s ailing economy yesterday as the Government stuck to its deficit-cutting pledge and said the bank should support growth.

The British central bank’s decision is likely to have been close-run. Last month, three officials – including Governor Mervyn King – voted to buy a further £25 billion (€29 billion) of government bonds.

Since then economic data have painted a picture of an economy teetering on the edge of its third recession in three years and several policymakers had said they were open to a wide range of ideas to boost the economy.

Economists polled by Reuters had seen a roughly 40 per cent chance that the central bank would restart its asset purchase programme this month.

Sterling jumped from levels close to a two-and-a-half-year low after the bank announcement.

The central bank said it was leaving the total level of asset purchases at the £375 billion reached by October last year. It also kept interest rates unchanged from the record low 0.5 per cent first hit four years ago.

“Although the Monetary Policy Committee (MPC) left policy on hold again today, we expect that it will not take much to swing a majority of members in support of more stimulus in the near future,” said Capital Economics’ Martin Beck.

Ahead of the bank’s announcement, Prime Minister David Cameron said that it would be disastrous for his coalition government to abandon the austerity programme that has been the mainstay of its economic policy since coming to power in 2010.

Cameron also said yesterday that the bank should support economic recovery without putting financial stability at risk.

Cameron’s comments underscore how the bank’s monetary policy remains the main tool to support growth, even as a senior member of the coalition government suggested it may be time to borrow more to invest in infrastructure projects. But those arguing against further stimulus already point to Britain’s sticky inflation, which is currently at 2.7 per cent and not expected to return to the two per cent target until early 2016.

Britain’s central bank has already bought £375 billion of gilts, the equivalent of 26 per cent of the economy, far more in relative terms than the Federal Reserve’s bond-buying.

Despite the bank’s efforts, the economy contracted at the end of last year, and scepticism is growing about what more of the same would be achieved.

The British Chambers of Commerce downgraded its growth forecasts yesterday and said fiscal policy, including measures to support business investment, would be more effective.

The Financial Times reported late on Wednesday that the Government could soon change the BoE’s mandate to give it greater focus on boosting growth.

But analysts said the bank was already adopting a flexible interpretation of its remit – to target inflation at two per cent on a two-year horizon – so tweaks to the wording may make little difference in practice.