Central Bank extends the QE programme with £50bn more

Aug. 11, 2009 - PRLog -- London (Shakespeare Finance) 11th August, '09: In what can be called a surprising move, the Monetary Policy Committee(MPC) of Bank of England today decided to extend the quantitative easing (QE) programme to £175bn. The MPC also decided to retain the lending rate at 0.5%.

The decision to extend the QE comes as a shock after the high-policy takers of the Central Bank had earlier decided not to increase the asset purchase at its two previous meetings.

The Bank has already spent £125bn to purchase government bonds out of the £150bn allocated by the exchequer to inject more money to the economy as part of countering the recession.

The new decision to pump more money, indicates that the Central Bank is likely to concern the economic slowdown more seriously.

The economy of the country was in complete mess when the Central Bank started its measures of recovery with the QE programmes. The second quarter witnessed a contraction of 0.8% in GDP, much worse than financial think-tanks and the BoE itself had forecast. Also, the tight credit situation of both the individuals and the corporates might also have encouraged the Bank to carry on with Quantitative Easing programme.

Weak money growth, along with weak credit, yields on government debt, which are higher than before the Bank spent over £120bn on gilts, and above all the fears that the banks remain under capitalised and are unable to support a recovery also seem to be worked behind the new decision.

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