By Fiona Shaikh
LONDON, Oct 7 (Reuters) - The Bank of England is almost certain to leave interest rates on hold again on Thursday, but the outcome may conceal a three-way split between policymakers on whether economic conditions justify tighter or looser policy.
Mixed economic data combined with persistently high inflation have muddied the water for BoE policy, and worries about the global recovery and other central banks' willingess to inject more stimulus have made matters even more complicated.
All 61 economists in a Reuters poll reckon the Monetary Policy Committee will keep Bank Rate at a record low 0.5 percent for the 20th successive month when their two-day meeting ends at 1100 GMT, and most think rates will stay there for much of 2011.
But for the first time since November 2009, they expect that at least one member will vote for the central bank to expand its 200 billion pound ($318 billion) programme to buy assets with newly-created money -- or quantitative easing.
External MPC member Adam Posen is seen as likely to call for an increase in QE after he warned last week that Britain risked falling into the same type of slump that afflicted Japan in the 1990s. [ID:nLDE68R1R3]
Although Posen said his vote this month was not a foregone conclusion, his was the first call in almost a year for more stimulus and is in direct contrast to colleague Andrew Sentance, whose worry about inflation has led him to vote for rate hikes.
Investors will have to wait until the BoE publishes minutes to this month's meeting on Oct. 20 to find out whether either of them persuaded any colleagues to adopt their view.
Still, growing speculation the U.S. Federal Reserve will embark on more asset purchases and this week's surprise move by the Bank of Japan to cut interest rates and prepare the way for quantitative easing have raised bets the BoE will follow suit.
"We currently put the odds of the Bank of England eventually enacting more Quantitative Easing at 40 percent and rising," said Howard Archer, an economist at IHS Global Insight.
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Signs that growth is slowing after the robust 1.2 percent expansion in the second quarter, and the risk that deep public spending cuts will also hurt, had already led some on the MPC to believe there was a greater chance more QE may be needed.
On the other hand, with inflation still well above the central bank's 2 percent target, policymakers may be worried that further monetary easing could undermine markets' faith in their commitment to keep price pressures in check.
In any case, the central bank will probably want to wait until it has its updated growth and inflation forecasts in November before deciding on what course of action to take.
"The policy outlook beyond this month is highly uncertain," said Simon Hayes, economist at Barclays Capital.
"We believe that credibility concerns mean most MPC members would have an instinctive preference not to embark on more gilt purchases. On the other hand, 'risk management' considerations might imply that a QE extension is preferable to keeping policy on hold.
"As such, we would see the risk as skewed towards policy loosening rather than policy tightening in the coming months."
(Editing by Ron Askew)