Thursday, 6 October 2011

£75b more to be put into quantitative easing as Bank of England worries over bleak situation

In the wake of more bad economic news this week,the Bank Of England has announced that it will be pumping more liquidity into the country through quantitative easing

Its monetary policy committee announced that an extra £75b will be made available,as well as keeping interest rates at their current 0.5 per cent level.

The bank in a statement have said that the pace of global expansion has slackened, especially in the United Kingdom’s main export markets.

Adding that vulnerabilities associated with the indebtedness of some euro-area sovereigns and banks have resulted in severe strains in bank funding markets and financial markets more generally. These tensions in the world economy threaten the UK recovery.

The Committee expects the announced programme of asset purchases to take four months to complete. The scale of the programme will be kept under review.

Graeme Leach, Chief Economist at the Institute of Directors, said of the move:

“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.”

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