BOE announces further quantitative easing
7th May 2009
As widely expected, the Bank of England left the UK Base Rate steady at 0.50% today, instead deciding to extend its initial three-month quantitative easing programme to tackle the British recession. The Central Bank had already slashed rates to a record low in March and indicated that they were unlikely to ease borrowing costs any further, with the MPC focused instead on monitoring the effectiveness of its asset purchasing programme.
The Bank of England is already two-thirds of the way through its initial programme to buy gilts and corporate bonds with newly-created money and it is likely to reach the £75 billion total by the end of this month. The Committee also voted to continue with its programme of asset purchases and to increase its size by £50 billion to a total of £125 billion.
Looking beyond the May meeting, the success of the quantitative easing policy will ultimately be judged against the objective of lowering the yields on gilts and corporate bonds and ultimately helping to create conditions for a sustained recovery in confidence and economic activity.