Thursday, 9 February 2012

Bank of England pumps another £50bn into UK economy

The Bank of England is to extend its quantitative easing programme and inject another £50 billion into the UK economy in a further bid to prevent another recession.


Despite business surveys last week suggesting a fresh fall into recession could be averted, the Bank's monetary policy committee (MPC) voted to print more cash, increasing QE from £275 billion to £325 billion.

The committee justified its actions by arguing that the UK recovery slowed during 2011 and said a slowing in the pace of expansion in the United Kingdom's main export markets - namely the eurozone - meant there were concerns about the 'indebtedness and competitiveness of some euro-area countries'.

The MPC also left interest rates at record lows of 0.5 per cent.

Worries have been expressed over risks posed to the country's inflation rate by further QE - a scheme launched during the recession in 2009 - but business leaders said the extra stimulus would 'support confidence' and welcomed the decision.

David Kern, chief economist at the British Chambers of Commerce, said: 'Although the benefits are not immediately obvious to the business community, quantitative easing plays a key role in strengthening the financial system and stabilising the wider economy.'

TUC general secretary Brendan Barber described the increase in QE as 'the right thing to do' but said due care had to be given to ensure the cash is distributed in an effective way.

'More needs to be done to ensure that this latest injection of cash actually reaches the businesses that need it, rather than just gathering dust on banks' balance sheets,' he said.

'The failure of banks to increase net lending to businesses, despite £275bn of quantitative easing, is holding back growth in the real economy.'



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