Belfast Telegraph

£50bn cash boost as King unleashes latest round of QE

By Jamie Grierson

The Bank of England has injected a further £50bn into the economy in an effort to help the UK stave off another recession.

The Bank's Monetary Policy Committee (MPC) voted to increase the quantitative easing (QE) programme - effectively printing more cash - from £275bn to £325bn despite the risks it poses to the inflation rate.

Meanwhile, it held interest rates at a record low of 0.5%.

Pensioners' groups have warned that further QE could leave more than a million pensioners "permanently poorer for the rest of their lives" due to the adverse effect money-printing has on annuity rates.

But business leaders said further stimulus would "support confidence" and welcomed the decision.

The boost comes amid mixed signs for the economy as surprisingly upbeat industry surveys for January conflicted with a downgraded growth forecast from the National Institute of Economic and Social Research (NIESR) while economists warned of the potentially damaging impact of recent extreme weather.

Explaining the move, the Bank said that while recent business surveys have "painted a more positive picture", the pace of expansion in the eurozone - the UK's main export market - has slowed and "concerns remain" about the region's debt levels.

The Bank said that tight credit conditions and the Government's austerity measures present headwinds looking ahead, while inflation, which dropped to 4.2% in December, should continue to fall sharply in the near term.

The Government and the Bank have both placed much of the blame for the UK's economic difficulties on the troubles in the eurozone.

But the MPC held fire on boosting QE in recent months as it waited for the last round of asset purchases, unveiled in October, to be completed.

The Bank said the £50bn boost would take three months to complete.

In a letter authorising the boost, chancellor George Osborne said he agreed that an increase in the asset purchase ceiling would "provide the MPC with the scope to meet its inflation target".

The Markit/CIPS surveys showed the manufacturing sector returned to growth in January, while the services sector saw a record leap in optimism.

Despite the upbeat data, most analysts insisted it was too early to call a recovery after the NIESR thinktank warned that the UK economy would shrink by 0.1% in 2012 amid weak investment and uncertain conditions.

The economy contracted by 0.2% in the final quarter of 2011, sparking fears the UK would fall back into another recession - defined as two successive quarters of falls.