The economy is more stable, says Bank of EnglandLow interest rate and quantitative easing works

18 December 2009

bank of england

The UK economy is in a better shape than it was six months ago, according to a Bank of England report. 

The bi-annual Financial Stability Report states that the banking crisis is easing as a result of intervention from the Bank, with quantitative easing and the low interest. The Bank of England base rate has remained at 0.5% for nine months, while quantitative easing - the printing of money which is used to buy government and corporate bonds in order to encourage businesses to spend - has generated more than £200 billion, money that has encouraged trading and lending. 

Word of caution

While claiming that the economy is moving in the right direction, the Bank's report noted that banks need to be prudent as many will have unhealthy balance sheets, and should not presume that the economy will move smoothly out of recession. The report's authors noted: 'A sluggish recovery could lead to financing difficulties among overstretched borrowers and larger-than-expected bank loan impairments.'

Consumer power

As the economy improves, it is essential that consumers have a say in the way the City operates, if some of the problems that contributed to the financial crisis are to be avoided. Which? has launched an inquiry into the financial sector. The Future of Banking Commission will look to put consumers at the heart of reform of the banking industry, and will involve key players from politics, industry and consumers groups.

pound coins

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