Bank increases QE to £275bn
THE Bank of England’s Monetary Policy Committee has today extended its strategy of quantitative easing, saying it will pump an extra £75bn into the economy to help drive growth amid continuing economic gloom.
The injection adds to the £200bn already pumped into the economy back in November 2009 – almost two years ago.
However, it has maintained interest rates at their historic low of 0.5%. Rates were last changed back in March 2009.
Calls for the Bank to pump more money into the system had been getting louder month-on-month, given the fragility of the economic recovery and continuing uncertainty in the wider global economy.
However, the £75bn increase was more than had been predicted with most analysts guessing the rise would be £50bn.
Graeme Leach, chief economist at the Institute of Directors, said: “What did we want? More QE. When did we want it? Now. Near zero GDP and money supply growth made a compelling case and the Bank of England was right to launch QE2.
“It could be argued that the Bank of England was slow to introduce QE the first time, but thankfully it hasn’t made the same mistake twice.”
Dr Brian Sloan, chief economist at Greater Manchester Chamber of Commerce, said: “The Chamber broadly welcomes today’s decision of the Monetary Policy Committee to commit to a further round of its Asset Purchase Programme.
“However, if this is to be effective at driving demand in the economy, it is vital that the Quantitative Easing takes place in a more imaginative way, with the Bank focused on ensuring that the money is delivered to the regions and to SMEs rather than solely purchasing government gilts. Local infrastructure projects could be kick-started with some of this money which would lead to a significant strengthening of the regional economies.
“The confirmation of the retention of the base rate at 0.5% adds further confidence to business that lending rates will broadly remain low for the foreseeable future.”
