11/03/2009 - Economy gets ready to receive £75bn
A total of £75 billion is to be pumped into the flagging economy when the Bank of England begins buying up £2 billion in Government bonds as part of the quantitative easing initiative.
Despite slashing interest rates to a record low of 0.5%, the Bank`s policymakers decided on the ground-breaking course of action because they felt more still needed to be done to lift the UK out of recession.
The move from the Monetary Policy Committee (MPC) can create up to £150 billion of new cash if necessary in order to boost the money supply and encourage lending to businesses and homeowners.
The first part of the plan will see the Bank buy up Government gilts through twice-weekly auctions on Mondays and Wednesdays over three months.
The bulk of the assets being bought up by the Bank are likely to have been sold by pension funds and other institutional investors which hold Government gilts for their steady returns.
This new money will be placed in their accounts with UK banks, boosting the banks' deposit bases and allowing them to lend more in the wider economy.
Copyright © Press Association 2009
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