Bank injects another £75 billion into the economy - Economy - News - Moneyfacts

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Bank injects another £75 billion into the economy

Bank injects another £75 billion into the economy

Category: Economy

Updated: 06/10/2011
First Published: 06/10/2011

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The Bank of England is to inject another £75 billion into the economy through its Quantitative Easing (QE) programme.

The announcement was made at noon today, with the funds coming on top of the £200 billion that has already been inserted into the UK economy since the Bank initiated the programme in March 2009.

The last time the Bank changed the size of the injection was on 5 November 2009, when an additional £25 billion was pumped into the UK economy.

The size of the Bank's QE initiative now totals £275 billion, with the latest tranche of money released as the UK's economic recovery hangs in the balance.

The Bank said that the UK's underlying growth has moderated, as figures out yesterday downgraded the country's GDP growth for both the first and second quarters of the year.

There is also concern about the problems in the eurozone, with the most recent instalment of Greece's bailout money being held back and Italy having its credit rating downgraded in the last week.

QE works by the Bank buying up shares in Government and bank bonds as well as a smaller number of private assets and debts.

The programme is designed to boost the UK's banks' liquidity, in turn increasing lending to businesses and individuals.

As the economy improves, the Bank would look to recover its investment.

The British Chambers of Commerce (BCC) welcomed the move, but said that other measures, such as an increase in the purchase of private sector assets and announcing that interest rates will not rise until the end of 2012 at least, are needed.

David Kern, Chief Economist at the BCC, said that such moves would help to 'underpin business confidence'.

John Walker, National Chairman of the Federation of Small Businesses said: "With growth revised downwards yesterday, pumping more money into the economy through quantitative easing is welcomed.

"However, it is important that in an attempt to boost short-term demand that small businesses can directly benefit from this cash injection and that the banks use it to decrease the cost of credit and to increase the availability of lending."

The Bank of England also announced that interest rates remain on hold at 0.5%.

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