In a very light week for economic releases, the centre of attention will be the minutes of the September meeting of the Bank of England's Monetary Policy Committee (MPC), which are released on Wednesday. There seems little doubt that interest rates are set to stay down at 0.50% deep into 2010, and it is a racing certainty that all nine members of the MPC voted in favour of unchanged interest rates at the September meeting. In contrast, there is a lot of uncertainty about whether the Bank of England will further increase its Quantitative Easing (QE) programme after raising it by a further £50 billion to £175 billion at its August meeting. This is scheduled to be spent by early November. Indeed, three of the nine MPC members (including Bank of England governor Mervyn King) wanted to increase QE by £75 billion to £200 billion in August, although one of the three (Tim Besley) left the MPC after that meeting.

The September MPC meeting did not result in any further changes to QE. Nevertheless, how the committee voted, and the tone of the minutes, could offer clues as to how likely it is that QE will be further extended. The minutes may also give insight into how seriously the MPC is contemplating cutting the interest rate that the Bank of England pays on commercial banks' reserves to try and get them to inject more liquidity into the financial system—for example, by purchasing more short-term gilts. While latest data and survey evidence have lifted expectations that the U.K. economy will return to growth in the third quarter, the MPC clearly continue to have major concerns about the strength and sustainability of the upturn. The MPC also have major ongoing concerns about the lack of bank lending, and are particularly worried about credit availability for small- and medium-sized companies.

The British Bankers' Association (BBA) is expected to report on Wednesday that mortgage approvals for house purchases rose to an 18-month high of 41,000 in August, from 38,181 in July and a record low of 18,323 in November 2008. Even so, this would still be a low level of mortgage approvals compared to long-term norms. Indeed, the BBA data show that mortgage approvals averaged 60,898 a month between September 1997 (when the series started) and July 2009. Buyer interest has been lifted substantially by the sharp overall fall in house prices from their autumn 2007 peak levels and markedly reduced mortgage interest rates, which is gradually but steadily feeding through to lift housing market activity. Furthermore, house prices are currently being supported by a lack of properties for sale. Nevertheless, housing market activity is still muted compared to long-term norms, while credit conditions remain tight and economic fundamentals are still far from favourable for the housing market. Consequently, we suspect that house prices are likely to suffer relapses over the coming months despite their current firmer tone.

The Office for National Statistics is not expected to make major revisions to its data for business investment in the second quarter (out Friday). The provisional estimate showed business investment plunging 10.4% quarter-on-quarter and 18.4% year-on-year in the second quarter. This was the sixth consecutive quarterly fall and was well above declines of 7.6% quarter-on-quarter in the first quarter and 0.6% quarter-on-quarter in the fourth quarter of 2008. The provisional estimate showed that the plunge in business investment was widespread across sectors in the second quarter, including quarter-on-quarter falls in manufacturing (17.7%), the services sector (10.4%), and construction (9.1%). Investment suffered hugely in the second quarter, as businesses faced extended very weak demand, increasing levels of spare capacity, poor cash flows, persistently tight credit conditions, and deteriorating profitability. Furthermore, businesses had major concerns and uncertainties about the sustainability and strength of any recovery. On top of this, the marked downturn in the commercial property sector, weak housing market activity, and reduced prices have weighed down on construction investment.

23 Sep - Bank of England Monetary Policy Committee interest rate vote split, August (Hike-Unchanged-Cut): 0-9-0
23 Sep - Bank of England Monetary Policy Committee Quantitative Easing vote split, August (More-Unchanged-Reduced): 3-6-0
23 Sep - British Bankers Association Loans for House Purchases, August (000s): 41
25 Sep - Business Investment, Second-Quarter 2009 (Quarter-on-Quarter): -10.4%
25 Sep - Business Investment, Second-Quarter 2009 (Year-on-Year): -18.4%