Bank's stimulus boosted economy
The emergency quantitative easing (QE) programme rolled out after the financial crisis boosted the economy by as much as 2%, the Bank of England has said, adding weight to calls for more money printing.
Its QE programme saw it buy £200 billion of assets, equivalent to about 14% of GDP, between March 2009 and January 2010, to help breathe life into the UK economy following the credit crunch.
The report - its first to measure the effect of QE on the economy - found the stimulus measure provided a "significant" benefit to growth and helped GDP increase by around 1.5% and 2%. This was also equivalent to dropping interest rates by between 1.5 and 3 percentage points, it found.
Its findings will add to calls for the Bank to embark on a second round of money printing, or QE2, amid fears the UK's economy could slip back into recession.
The Bank cannot lower its interest rate to boost growth - it is already at a record low of 0.5% - so there is increasing speculation that it will again print more money. However, this could also lift inflation, which would heap more misery on cash-strapped households.
Its last bout of QE boosted the consumer prices index (CPI) measure of inflation by between 0.75 and 1.5 percentage points, the report said.
When the bank injected money into the economy it was worried that CPI would fall below its 2% target. Since then, it has shot up to 4.5% amid higher commodity prices and tax increases.
Although the report provides evidence that quantitative easing measures were effective in boosting growth, it points out that the effects may be different the second time round.
The report said: "The economic circumstances in which further asset purchases or sales are made may be very different from those that prevailed in early 2009, so it cannot be assumed that the magnitude of the effects will necessarily be the same."
There has been evidence in recent months that some members of the Bank's nine-strong Monetary Policy Committee have considered voting for more QE. Committee member Adam Posen, who has been alone in voting for the measure, warns it is necessary to avoid lasting damage to the UK economy. He argues that inflation is due to peak this year and that there is now a danger it will fall below target in two years' time.