Having already injected £200bn into the economy in 2009 after the banking crisis, the Bank of England announced today that it will inject a further £75bn through quantitative easing.
Possibly in response to the bad news on the economy [see earlier story] the Bank of England is preparing to launch another round of QE which works by purchasing financial assets from banks and other private sector businesses with new electronically created money. This increases the excess reserves of the banks in an attempt to boost their lending to businesses.
The Bank also held interest rates at the record low of 0.5%.
QE is generally considered to be inflationary but with inflation nudging 5% [see earlier story] the Bank defended its action saying, "The deterioration in the outlook has made it more likely that inflation will undershoot the 2% target in the medium term.
"In the light of that shift in the balance of risks, and in order to keep inflation on track to meet the target over the medium term, the [Monetary Policy] committee judged that it was necessary to inject further monetary stimulus into the economy."
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