Addressing a meeting of the South Wales chamber of commerce in Cardiff last night, Sir Mervyn said he expected the UK economy to continue its "zig zag pattern" of growth and that the Bank stood "ready to inject more money into the economy" as a result.

In a stout defence of the Bank's expansionist monetary policy, Sir Mervyn said a "damaged banking system means that today banks aren't creating enough money. We have to do it for them." He added that without low interest rates and quantitative easing the economy would be in a much worse state than it is. However, he did admit that the policy was causing "pain to those dependent on interest income".

Sir Mervyn's words tally with the views of many experts that the Bank may announce a further expansion of its £375bn quantitative easing programme soon, particularly if the economic data continues to disappoint.

Tomorrow, the first estimate of third quarter UK GDP will be unveiled and is expected to show that the economy rebounded in the three months to the end of September following a horrific second quarter shrinkage. However, the outlook for the final quarter and 2013 looks very uncertain, with many institutions forecasting flat growth at best.

The fragility of the UK economy was further underlined by new lending figures. The British Bankers' Association recorded the eighth fall in business lending in the past nine months, with £1bn less being lent out in September than in August. This fall in lending is despite the Bank of England launching its £80bn Funding for Lending scheme (FLS) designed to boost the availability of credit.

In his speech in Cardiff, Sir Mervyn said it was still too early to judge if the FLS was a success or not "because of the time it takes for banks to change their lending strategies and for data to be collected".