£25bn to be pumped into the ecomonyQuantitative easing spend will hit £200bn mark

05 November 2009

bank of england

The Bank of England has announced plans to inject another £25bn into the UK economy via its quantitative easing programme. The latest commitment brings the total amount pumped into the UK economy to £200bn.

The Bank is injecting more money into the system in order to stimulate growth, although critics are likely to argue the economy’s continued decline suggests the strategy is not working. 

Quantitative easing involves the Bank printing new money which is then used to buy government and corporate bonds from other institutions. It is hoped that the extra money in the system will encourage businesses to spend.

The £25bn will be released over a three-month period. It is half the sum released in the previous three months, when £50bn was allocated. 

Bank statement

In a letter to Alistair Darling, the Chancellor of the Exchequer, Bank of England governor Mervyn King explained why more quantitative easing was required. Mr King wrote: 'Households have reduced their spending substantially and business investment has fallen especially sharply. A number of indicators of spending and confidence, however, suggest that a pick-up in economic activity may soon be evident.'

Recession rumbles on

The Bank of England's decision to turn to quantitative easing for another three months has been welcomed by business groups, but is a firm indication that tough times still lie ahead for consumers. Anyone who is concerned about their finances, savings, or household bills should view the relevant advice pages on www.which.co.uk.

pound coins

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