Ending its program of quantitative easing, or QE, may make life more difficult for Britain's Conservative-led ruling coalition, which was battered in local elections last week and relies on loose monetary policy to soften the pain of austerity measures aimed at cutting the country's huge public borrowing.

But after buying 325 billion pounds of government debt with newly created money, 50 billion pounds of which has been purchased in the last three months, the bank is likely to judge that its policy stance is already supportive enough.

Policymakers, most prominently deputy BoE governor Paul Tucker, have also indicated that inflation may not fall as fast as forecast below the bank's 2 percent target after it rose for the first time in six months in March, touching 3.5 percent, the highest rate in the Group of Seven major advanced economies.

Only five of the 58 economists polled by Reuters expect the central bank to announce further asset buying when it publishes its decision at 1100 GMT.

The minutes of the Monetary Policy Committee's (MPC) April meeting showed that inflation worries had become more dominant, and that long-standing quantitative easing advocate Adam Posen had dropped his vote for more QE.

Bank of England Governor Mervyn King has also said that the economy looks set to recover slowly and steadily later this year while inflation is too high.

Still, Thursday's decision could be a close call.

"If the MPC wants to expand QE, it has no shortage of justifications," Barclays economist Simon Hayes said. "Recent weeks have brought a procession of bad news."

The economy shrank 0.2 percent in the first three months of 2012, putting Britain officially back into recession, while previously more upbeat business surveys showed slowing growth.

Soft industrial production data out on Thursday did not suggest that first-quarter GDP would be revised up or that a strong rebound was in the offing, though manufacturing did bounce back somewhat more than expected.

"It's essentially in line with what we had in the preliminary GDP estimate. But the underlying picture looks a bit better because of the stronger manufacturing number," said RBS economist Ross Walker.

The euro zone crisis has also flared up again with turmoil in Greece. But this is not enough to allay the central bank's growing inflation concerns.

"Inflation has not been at the 2 percent target for more than two years," Barclays' Hayes said, adding that more asset purchases may do little to kick-start sluggish demand or ease the dangers from the euro zone debt crisis.

"Under this cloud of doubt the MPC may prefer to hold fire unless a fresh crisis, or more prolonged weakness in demand, makes the case for QE irresistible," he added.

The central bankers will base their decisions on updated growth and inflation forecasts, which King will announce next week.

(Additional reporting by David Milliken; Editing by Hugh Lawson)

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