The private sector has welcomed the Bank of England's decision to ramp up its quantitative easing (QE) programme by a further £50 billion.

At their February monthly meeting, members of the institution's Monetary Policy Committee (MPC) voted to increase the scale of the asset purchase fund to £325 billion, in an attempt to stimulate economic activity.

The decision had been expected by some groups, with the British Chambers of Commerce (BCC) among those vociferously calling for another injection of finance.

David Kern, chief economist at the organisation, said quantitative easing plays a key role in strengthening the financial system and stabilising the wider economy.

"In the face of difficult domestic circumstances and the ongoing crisis in the eurozone, the decision was a sensible one," he added.

However, Mr Kern said QE would be more effective for businesses if the MPC included the purchasing of private sector assets in the programme, instead of focusing exclusively on gilts.

Furthermore, it should be supplemented by other measures to boost growth and improve the flow of credit to businesses as it will not achieve its full potential on its own, he advised.

"This means implementing an aggressive deregulatory programme alongside a package of credit-easing measures or a small and medium-sized enterprise bank," Mr Kern stated.

Ian McCafferty, chief economic adviser at the Confederation of British Industry, said the Bank had been signalling that a further extension of the asset purchase programme was likely this month.

"Even though there are tentative signs that the economy is stabilising, the outlook is still highly uncertain," he commented.

"This new round of QE should help support confidence, though the direct stimulus to near-term growth is likely to be limited."

The Bank's MPC also voted to keep interest rates on hold at 0.5 per cent for another month.

This decision was never in doubt, given that a rise from the historic low would have served to counter any positive impacts from the £50 billion increase to QE.

Interest rates have now been kept on hold at 0.5 per cent for nearly three years, the last movement coming in March 2009 with a half a percentage point drop.

Posted by Steve Williams