Bank of England: Interest rates and quantitative easing

The Bank of England has said that UK banks are still failing to provide enough credit to businesses and households. BOE will expand its programme of money creation by £25bn over the next three months, to boost Britain’s recession hit economy.

Threadneedle Street announced today that it will leave bank rate at its record low level of 0.5%, where it has been since March. Warning that UK banks are still failing to provide enough credit to businesses and households, the Bank said it would increase the size of quantitative easing (QE) to £200bn.

The Bank’s nine-strong monetary policy committee announced that It is cheap borrowing and QE were needed to prevent inflation falling below its 2% target. A Statement by the bank said: “On balance, the committee believes that the prospect is for slow recovery in the level of economic activity, so that a substantial margin of under-utilised resources persists.”

The output in the UK had dropped by 6% since the start of a recession that has now lasted for six quarters, the longest period of decline since records began in 1955. To read more on this story go to guardian.co.uk.