Bank imposes increase to quantitative easing

The Bank of England has decided to increase its quantitative easing scheme from £125 billion to £175 billion, in a surprise move announced today.

Analysts had previously predicted that policymakers would increase its money-printing programme by £25 billion, if at all.

However, the Bank said in comments accompanying the announcement that the economic downturn could prove ’deeper than previously thought’ - necessitating the increase.

Interest rates have also been kept at 0.5 per cent - an all-time low in the institution’s 300-year-plus history.

The Bank has launched the unprecedented policy actions due to concerns that commercial banks are not lending enough in the credit crisis and recession.

Through printing money and keeping lending cheap, the policymakers hope to provide a stimulus to the economy as a whole.

The quantitative easing move has met with a largely positive reaction from financial firms.

’We expect the economic recovery process to be drawn out as a continuing squeeze on the availability of credit is compounded by a further rebalancing of household balance sheets,’ the Royal Institution of Chartered Surveyors said.

’This prospect justifies the actions of the authorities in continuing to take steps to boost liquidity.’

The Association of Mortgage Intermediaries commented: ’While there have been some positive signs that the economy is in a recovery stage, there remains an under supply of lending compared to the demand from homeowners and potential homebuyers.

It added: ’The Bank and the lending industry must do more to ensure that sufficient finance is available to give the housing market a further nudge.’ADNFCR-2318-ID-19300357-ADNFCR