Bank confirms quantitative easing extension
Fri, 06 Nov 2009
The Bank of England has acted as expected by increasing its quantitative easing programme by £25 billion.
Following the November meeting of the Monetary Policy Committee (MPC), it was announced that the programme of asset purchases financed by the issuance of central bank reserves had been extended to a total of £200 billion.
There were no surprises where interest rates are concerned either, as the MPC decided to hold them at their historic low of 0.5 per cent for a ninth month in succession.
Explaining the moves, the committee said that while the world economy has shown signs of recovery, global activity as a whole remains "significantly depressed".
It added that although asset prices have risen internationally since the spring and banks' funding conditions have improved, conditions "remain fragile".
The Bank said economic output and inflation levels were being influenced by two opposing factors – the stimulus measures being carried out and the continued lack of available credit.
A statement read: "In order to keep inflation on track to meet the two per cent inflation target over the medium term, the committee judged that maintaining bank rate at 0.5 per cent was appropriate.
"The committee also agreed that it should extend its programme of purchases of government and corporate debt by £25 billion to a total of £200 billion."
Earlier this week, Vicky Redwood, UK economist at the research consultancy firm Capital Economics, predicted this precise course of action.
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