The Monetary Policy Committee (MPC) at the Bank of England, the central bank in the U.K., voted on Thursday to pump another £25 billion ($41 billion) into the country's economy.
In a move widely expected by the markets, following the figures released last week that confirmed the U.K. economy was still in recession during the third quarter of the year, the Bank of England has extended its quantitative easing program by £25 billion, having increased the program once before in August by £50 billion. To date the program has seen the creation/utilization of £175 billion.
At the same meeting, as the increase in
quantitative easing was confirmed (the
Financial Times explains the process is essentially the creation of more money to stimulate spending) the bank confirmed that interest rates would be held at 0.5 percent.
MarketWatch reports that the move announced after the monthly meeting involving the nine members of the MPC is significant in that other central banks are now more likely to be considering how they are to exit the stimulus programs introduced at the height of the global financial crisis rather than how they might expand such programs.
Despite its latest increase in quantitative easing the amount by which the program is increasing is being viewed in some quarters as actually a deceleration of a process, the full effects of which may not be obvious as yet.
It is expected that the Bank of England, whose current governor is Mervyn King, will use most of the new money it is creating, the process is electronic, to purchase government debt, or
government bonds.
The
Financial Times notes that neither spending nor lending by banks have risen at the rates the central bank was anticipating they would, with small and medium sizes businesses still struggling to obtain credit. Larger companies however have seen easier access to funds as the program has supported their issuing of stock and bonds.
According to
MarketWatch the policy committee would have considered the content of the bank's inflation report, which will not be made public until next Wednesday, covering the last quarter when making its decisions on interest rates and money supply. The level of inflation is always a factor in the level of interest rates but it will, says the
Financial Times, be key to when the bank starts to review whether its current monetary policy is still appropriate.
The outlook for the U.K. economy has been boosted in the last two days by news of better-than-expected increases in September's industrial production and manufacturing output, and in October's
purchasing managers index readings in the manufacturing and services sectors.
