The Bank of England plans to pump a further £25bn into the economy in an effort to bring the UK out of recession, it was announced today.
The £25bn brings the total amount allocated to the ‘quantitative easing’ asset purchase programme – effectively introducing extra money into the economy – to £200bn since it was launched in March.
The interest rate will remain at its all-time-low of 0.5% for the eighth consecutive month, the Bank’s Monetary Policy Committee (MPC) also revealed.
Announcing the decisions, the MPC said: “On balance, the Committee believes that the prospect is for a slow recovery in the level of economic activity.
“In order to keep inflation on track to meet the 2% inflation target over the medium term, the Committee judged that maintaining bank rate at 0.5% was appropriate.
“The Committee also agreed that it should extend its programme of purchases of government and corporate debt by £25bn to a total of £200bn, financed by the issuance of central bank reserves. The Committee expects the announced programme to take three months to complete and the scale of the programme will be kept under review.”
David Kern, chief economist at the British Chambers of Commerce (BCC), welcomed the decision to increase the level of quantitative easing, but said he had hoped to see more specific measures aimed at stimulating bank lending to companies.
“With the economy still declining in quarter three, forceful policies are needed to end the recession as soon as possible,” he said.
“The current measures, though helpful, will have to be supplemented with additional steps, and quantitative easing will have to be increased further.
“One critical factor delaying Britain’s exit from recession is the difficulty smaller firms face obtaining adequate finance.”
© Crimson Business Ltd. 2009