Thursday, 9 February 2012

Quantitative easing to continue

So just if we didn't know that the UK economy was teetering on the brink,this lunchtime's news that the Bank of England is to inject a further £50bn into the economy through the mechanism known as Quantitative easing.

Announcing that interest were to continue at 0.5 per cent where they have been now for over three years,the measure now takes the total asset purchases that the bank has made from £275bn to £325bn since it first introduced the measure to ward off the threat of fiscal meltdown.

The critics are still out on this policy.It is technically printing money and putting it back into the economy which can lead to inflation,if demand was increasing but the fact that it hasn't and that the Bank of England continues to do it, merely illustrates the dire situation that we are in.

It is worth reading Daniel Knowles piece on the Telegraph blog where he explains the economics behind it

The reasoning behind the Bank's move you can read Here but suffice to say that the bank has concerns that the underlying pace of recovery slowed during 2011, with activity falling slightly during the final quarter.

Some recent business surveys have painted a more positive picture and asset prices have risen. But the pace of expansion in the United Kingdom’s main export markets has also slowed and concerns remain about the indebtedness and competitiveness of some euro-area countries

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