Governments and Central banks around the world are paying particular attention to the UK today as quantitative easing is introduced for the first time. The first £2bn, part of a projected £75bn, was first offered to non bank institutions such as pension funds, where there were no takers. However the central banks was able to fulfil it’s buying quota of 2 billion pounds from banks, in a so called reverse auction.
The world is focused on how successful the UK attempt at restoring the economy through quantitative easing will be, previous measures of reducing interest rates and vat cuts have had little or no impact on real life economy in the UK , calling for the use of more unconventional methods by the country’s policy makers.
The central bank hopes that by buying up bonds, making yields fall sharply, it will make it cheaper for companies to borrow on the capital markets. Institutions that have sold gilts to the Bank, meanwhile, will have extra money to lend.
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