UK Finance News

another 25billion please!

The Bank of England have announced that they will pump another £25billion into the quantitative easing programme, taking it to a total of £200billion in what analysts believe will be the last expansion of the scheme to revive the UK economy.

The bank say that it will take another three months to complete bond purchases through the QE programme which has been increased because the economic recovery is likely to be slow.

The interest rate remains unchanged at 0.5% with analysts also suggesting that it would stay low until late 2010 when it will increase as a tool against expected inflation.

BoE warned that the UK could experience a short sharp shock of inflation as a consequence of higher fuel prices and the reversal of the governments controversial VAT cut during the coming months, when they predict that inflation will rise above the 2% target.

Experts are divided on the latest news, with many doubts being raised as to whether the QE strategy is working. Edward Manashy of economist Charles Stanley says;

“Where QE has succeeded is that it has raised asset prices and allowed companies to raise funds in the capital markets. Where QE has yet to succeed is convincing banks to lend money to smaller business enterprises and private individuals.”

Former MPC member DeAnne Julius is critical of the programme saying, “You have to ask yourself if it is helping the real economy and not just the banks. I’m afraid the answer is that it is not.”