By William Schomberg
LONDON (Reuters) - The Bank of England is expected to refrain from yet more stimulus on Thursday as it waits to see if a possible no-deal Brexit in two weeks' time deepens the problems already facing Britain's coronavirus-damaged economy.
London and Brussels are still trying to avoid the shock of import tariffs on trade from Jan. 1, so the BoE looks set to leave its bond-buying programme at 895 billion pounds ($1.2 trillion), having ramped it up by 150 billion pounds last month.
That should provide enough fire-power until late 2021, and the BoE's Monetary Policy Committee is expected to detail how front-loaded its new bond-buying will be.
The MPC is also likely to keep its benchmark interest rate at a historic low of 0.1% at 1200 GMT.
"We continue to expect a (Brexit) deal will be done," JP Morgan economist Allan Monks said. "But the main focus from the MPC this week will be any guidance it chooses to offer about how it would react to a no-deal."
Last month, the BoE said it was "ready to take whatever additional action is necessary to achieve its remit".
Now it might have to be more explicit, with the Brexit deadline approaching and COVID-19 restrictions spreading again.
Britain's budget forecasters say a failure to strike a trade deal would wipe 2% off economic output, drive up inflation and unemployment and add to public borrowing of 400 billion pounds this year.
Even with a deal, the BoE thinks the economy will suffer as companies struggle with paperwork, port delays and other effects of leaving the world's biggest single market.
For now, with a Brexit deal still possible and COVID-19 vaccines being administered, the MPC is likely to be relatively calm about the outlook.
Unemployment has not risen as sharply as the BoE predicted, and surveys of businesses have suggested the economy might shrink by less than its forecast of 2% in the fourth quarter.
The BoE's bond-buying programme is widely seen as its most likely weapon should it need to return to the stimulus pumps.
But investors are watching for any fresh signals on Thursday about the feasibility of taking interest rates below zero.
The BoE has asked banks what a move to negative rates - something imposed already in the euro zone and countries such as Japan - would mean for them. On Monday, HSBC and Santander (MC:SAN) representatives said they were not ready for such a move.
($1 = 0.7409 pounds)