Bank set to add £50bn economy boost
The Bank of England has injected a further £50 billion into the economy as the UK battles to stave off another recession.
The Bank's Monetary Policy Committee (MPC) voted to increase the quantitative easing (QE) programme - effectively printing more cash - from £275 billion to £325 billion despite the risks it poses to the country's inflation rate. Meanwhile, it held interest rates at a record low of 0.5%.
The move will draw criticism from pensioners' groups who 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 think-tank 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, which still have no clear resolution. 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 £50 billion 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".
But shadow chancellor Ed Balls said: "The Bank of England is doing all it can to try and boost our flatlining economy, but it can't perform miracles. Simply printing more money cannot offset the contractionary effects of George Osborne's tax rises and spending cuts that go too far and too fast - a 'drag' on growth that the Governor of the Bank of England acknowledges in his letter today."