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News - 7 October 2011

Bank of England: QE Extended By 75bn

The Bank of England has said it will inject a further £75bn into the economy through quantitative easing (QE).

The nine-man panel decided to extend the QE scheme beyond the current £200bn by another £75bn over the next four months, saying: "Tensions in the world economy threaten the UK recovery."

But this is the first time it has added to its QE programme since 2009. There have been recent calls for it to step in again to aid the fragile recovery.

Sterling fell by almost two cents after the announcement to $1.5280, its lowest since late July 2010.

David Kern, chief economist at the BCC, said: "Higher QE on its own is not enough and we urge the MPC [Monetary Policy Committee] to look at other radical methods.

"There is a strong case for the MPC to help boost bank lending to businesses by immediately raising its purchases of private sector assets."

The manufacturers' organisation, the EEF, said that the Bank's decision to act now, before the third-quarter estimates of GDP and its latest inflation forecast were released, "would indicate that members believed immediate action was warranted in order to head off a deteriorating growth outlook".

The National Association of Pension Funds (NAPF) have also made their feelings known by calling for an urgent meeting with the pensions regulator to discuss ways of protecting UK pension funds from the negative effects of QE.

The Bank also held interest rates at the record low of 0.5%, while in a separate development, the European Central Bank kept its core interest rate at 1.5% despite pressure to aid growth through a cut.

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