The MPC-ometer is designed to predict the outcome of each month's MPC meeting based on incoming economic news and financial market developments. The model, like the consensus, forecasts no change in either Bank rate or quantitative easing plans today. The balance of news over the last month, however, is judged to be slightly dovish, suggesting the MPC may announce an expansion of QE in June when the current £75 billion asset purchase programme reaches completion.

The MPC-ometer includes both growth and inflation indicators. Growth news has been mixed: GDP plunged 1.9% in the first quarter but business and consumer surveys showed a surprisingly large improvement in April, while financial market conditions have eased. Inflation indicators have weakened since last month: the headline CPI increase remains above target but average earnings growth fell to an annual 0.1% in the three months to February and a large majority of manufacturers plan price cuts, according to the April CBI industrial trends survery.

The MPC could, in theory, lower Bank rate further from its current 0.5% level – the Federal Reserve has set a target of 0%-0.25% for US official rates. The Committee, however, judges that a further reduction would deliver little if any economic stimulus, reflecting a likely negative impact on banks' profits and willingness to extend credit. Any further easing of monetary policy should therefore take the form of stepped-up QE; the Chancellor has already granted the MPC authority to expand the programme to £150 billion.

The Bank of England is on track with plans to buy £75 billion of securities, mostly gilts, by early June. March monetary figures, however, showed a disappointing initial impact from QE: the broad money supply M4 rose by just 0.2% from February, with cash held by non-financial corporations falling. This reflects two factors. First, the Bank appears to have bought more gilts from banks and overseas investors than domestic non-banks in March – only UK non-banks' money holdings are included in M4. Secondly, the positive monetary impact of QE was offset by a fall in bank lending to the private sector (a small rise in sterling loans being offset by a contraction of foreign currency credit).

The Bank had bought only £17 billion of securities by the end of March so it is too early to conclude that QE is failing to achieve the MPC's monetary goals. Unless April money numbers show a pick-up, however, the Committee should extend the buying programme at its June meeting, probably for a further three months. Super-low interest rates are providing support to the economy but stronger money supply growth is needed to lay the foundations for a sustainable recovery.