Bank of England holds fire on more QE with economy predicted to narrowly avoid a triple-dip recession UK services sector shows strongest growth since Olympics Vote on money printing likely to have been another close call Economists expect Bank will pump in £25bn more in months to come By This Is Money Reporter The Bank of England held off from injecting more money into the economy and kept interest rates at record lows after stronger economic data suggested the country would avoid a triple-dip recession by a whisker. Rates today remained at just 0.5 per cent and the Bank's nine-strong monetary policy committee voted against firing up the printing presses to expand the quantitative easing (QE) scheme beyond its current £375billion level. An increase to QE had been on the cards as policy makers mulled a new slowdown in the economy that will become a 'triple-dip' recession if GDP in the the first quarter of 2013 is negative. Knife-edge decision: April's vote on more quantitative easing by the Bank is likely to have been another close call However, better news from the dominant services sector today suggested the UK will avoid this fate. The service sector racked up its fastest growth last month since the Olympics, which is thought likely to have offset further declines in manufacturing and construction. The economy is now thought to have eked out growth of around 0.1 per cent so far this year. As usual the bank announced interest rates and level of QE would be maintained at their current level without saying anything more. But the vote on more QE is likely to have been another close call. Governor Sir Mervyn King will probably have voted once more for further QE after minutes of the March meeting showed that members believed the UK faced a 50-50 chance of slipping back into recession in the first quarter. Sir Mervyn and fellow rate-setters David Miles and Paul Fisher voted for another £25billion of QE, which would have taken it to £400billion. The Bank of England's quantitative easing money-printing programme is widely feared to have helped create a bond bubble. Quantitative easing involves the Bank of England creating funds to buy up UK government debt - known as gilts. This huge leap into the financial unknown has hoovered up £375bn of gilts, driving their price (what they cost) up to artificial highs and pushing their yield (their annual interest return) down to record lows. Unwinding QE, or even just saying that it is finished once and for all, will have a huge effect on the now completely skewed market for gilts and also see their prices drop. But continuing to expand QE looks set to drive up prices and inflate the bond bubble still further. There are signs that investors could be growing more wary about the bubble. Recent investment industry data showed people are pulling money out of bond funds and stashing it in equity funds instead. But they failed to garner support amid fears over the impact on the pound and experts predict they will remain outvoted again in April, with the MPC most likely to hold QE and keep rates at 0.5 per cent until the economic outlook becomes clearer. Hopes have been raised that a solid performance from services firms at the start of the year might offset more woes in the construction and manufacturing sectors. The Office for National Statistics (ONS) said service sector output increased by 0.8 per cent in January on a year earlier and was up 0.3 per cent month on month, despite the snow impact. The initial estimate of first quarter economic output is released on April 25, but the MPC may take action sooner. The Bank has so far held off from more action due to the recent weakness of the pound, which received a battering after Moody's stripped the UK of its prized AAA rating and when it was first revealed that Sir Mervyn voted for more QE in February. Sterling fell to near three-year lows against the US dollar at one stage, although it has since steadied, edging back up against the greenback and the euro. There are also fears that more QE will add to inflation, which rose to 2.8 per cent in February and is predicted to increase to around 3.5 per cent in the summer. Economists expressed little surprise at the Bank's announcement today. Howard Archer, chief European and UK economist at HIS Global Insight, said: 'The Bank of England's decision to hold off from quantitative easing was highly likely once again the result of a split 6-3 vote... With consumer price inflation set to move above 3 per cent in the near term and sterling still vulnerable despite rising from its lows, several MPC members may want to see evidence that underlying price pressures are broadly contained before approving further stimulative action. But he added it was more a matter of when, rather than if, the bank would act claiming the Chancellor was keen for greater monetary activism to support the economy which was still struggling to find sustained growth. He predicted a further round of around £25billion of QE over the coming months. Elsewhere, David Kern, chief economist at the British Chambers of Commerce (BCC) welcomed the Bank's decision to hold interest rates at their current level and not increase QE. But he expressed concern at 'mounting pressure' for further economic stimulus later this year. 'Further increases to QE would be misguided, and provide only marginal benefits for the real economy while heightening risks of financial distortions, bubbles and higher inflation,' he said. Mr Kern said there were concerns that demand for more QE would be seen as part of a 'wider policy shift', which implied the Bank would be prepared "to tolerate higher inflation and a much weaker pound." If true, this is problematic. Although higher inflation may ease the debt burden, it would squeeze businesses and consumers, and be more likely to weaken growth rather than strengthen it. Adding to QE would also weaken sterling further, and the damage caused by higher inflation and more expensive imports would outweigh the small benefits to exporters from a lower pound,' he added. He also called on the Bank to make better use of its existing QE programme and look at other measures to support a revival of business lending suggesting progress on the Government's promised British Business Bank was crucial. Changes to the Bank's remit in the Budget formally gives it more flexibility in meeting its 2 per cent inflation target and room to support economic recovery efforts. The minutes of the meeting will be published at 9.30am on Wednesday 17 April.