BoE adds £75bn to quantitative easing programme
The Bank of England injected a further £75bn (€86bn) into the UK economy today in a bid to jump-start its flagging recovery.
Its Monetary Policy Committee (MPC) voted to boost its quantitative easing (QE) programme – effectively printing more cash – from £200bn to £275bn despite the risks it poses to the country’s inflation rate.
Meanwhile, it maintained interest rates at 0.5%.
The move – the first change to QE since November 2009 – offers the clearest signal yet that the Bank thinks Britain is on the brink of a double-dip recession.
The Bank of England said it boosted QE because ``tensions in the world economy threaten the UK recovery'' and the slack in the economy is likely to be ``greater and more persistent than previously expected''.
The decision was welcomed by business leaders who have called for help to stimulate the economy after figures revealed that Britain suffered a deeper recession and is recovering more slowly than first thought.
A report by the Bank into the effect of QE on the economy previously found that the stimulus measure provided a “significant” benefit to growth and helped GDP increase by around 1.5% and 2%. This was equivalent to dropping interest rates by between 1.5% and 3%, the Bank found.
Ian McCafferty, CBI chief economic adviser, said the Bank had “acted promptly” in the face of risks to the economic outlook.
He said: “This measure will help support confidence, but we need to recognise that its impact on near-term growth prospects is likely to be relatively modest. Only once the turmoil in the eurozone is resolved will confidence be fully restored.”
Economists warned yesterday that a double-dip recession was looking more likely.
Gross domestic product grew 0.1% between April and June, compared with an earlier estimate of 0.2%, while the first quarter was downgraded to 0.4% from 0.5%, the ONS said.
Elsewhere, falling consumer confidence was underlined by gloomy trading updates from the City.
