Bank of England injects £50bn into UK economy

Meanwhile, it held interest rates at a record low of 0.5%.

The boost comes amid signs the economy deteriorated in June as industry surveys showed that the construction sector went into reverse and the powerhouse services sector suffered its worst performance for eight months.

Most economists think gross domestic product - a broad measure for the total economy - fell slightly in the second quarter of 2012, following declines of 0.4% and 0.3% in the previous two quarters, as the eurozone debt crisis gathers pace.

The move will draw criticism from pensioners' groups, who have blamed the adverse effect of money-printing for a "meltdown" in annuity rates in recent years.

But business leaders said further stimulus would support confidence and welcomed the decision.

Dr Neil Bentley, CBI deputy director-general, said: "This extension of QE should provide a fillip to confidence."

The Bank's action also hit the value of the pound against the US dollar and Japanese yen as the market will be effectively be flooded with extra sterling.

The Bank said the decision to pump more money into the economy came as UK output had barely grown for a year and a half amid signs its main export markets are slowing.

It said: "Business indicators point to a continuation of that weakness in the near term, both at home and abroad."

The bank added: "Concerns remain about the indebtedness and competitiveness of several euro-area economies, and that is weighing on confidence here."

However, it said inflation, which fell to 2.8% in May, should continue to ease in the medium-term and its stimulus measures should help sustain a gradual strengthening in output.

James Knightley, economist at ING Bank, said: "We continue to have doubts over how successful extra QE will be, but seeing as the BoE has few other options we expect them to stick with it."

The increase in QE will come as a blow for pensioners whose annuity rates are hit by the money printing, while the continued low interest rates will hurt savers.

Recent research from accountancy network UHY Hacker and Young found that record low interest rates combined with the Bank's emergency support measures are causing savers to lose nearly £18bn a year.

Bank governor Mervyn King recently said he was shocked at the pace at which economic conditions had worsened as he unveiled the biannual Financial Stability report.

The gloomy industry figures for June revealed a further loss of momentum, leading most economists to predict a slight decline in GDP in the second quarter.

The MPC had already come close to pushing the button on more QE. Minutes of the June rates meeting showed four of the nine-strong committee - including Sir Mervyn - were narrowly out-voted.

Howard Archer, chief economist at HIS Global Insight, said there might still be more money printing to come, even though he thinks the economy will return to growth in the third quarter of this year.

He said: "We certainly would not rule out further QE in the fourth quarter.

"The economy is likely to remain fragile and prone to relapses, especially if there is not any sustained marked easing in the eurozone's problems.

"So it is very possible that the Bank of England will decide that more support is warranted for the economy, particularly if inflation heads down further."

Some economists think the Bank's QE programme could eventually be expanded to £500bn (€622.2bn).