Bank of England injects a further £50 billion into UK economy

The Bank of England has decided to extend its quantitative easing (QE) programme by a further £50 billion.

The scheme was introduced by the Monetary Policy Committee (MPC) in 2009 to boost the UK economy in the wake of the credit crisis, with an initial QE total of £200 billion. The latest £50 billion announced yesterday, alongside the additional £75 billion in October last year, will take the total amount of QE to £325 billion.

In a statement released yesterday, the Bank of England used the slowing pace of economic recovery in 2011, Eurozone concerns, and falling inflation to justify the decision.

Whilst the MPC acknowledged a recent strengthening in UK businesses - latest figures show that trade and manufacturing output rose in December last year - this has been offset by a slowing in the UK's main export markets.

It also predicted that 'economic slack' is likely to continue, despite a gradual strengthening of output growth later on this year and an easing on household incomes as inflation falls.

In its statement, The Bank of England said: "In the light of its most recent economic projections, the Committee judged that the weak near-term growth outlook and associated downward pressure from economic slack meant that, without further monetary stimulus, it was more likely than not that inflation would undershoot the 2% target in the medium term."

The Trade Union Congress (TUC) welcomed the move but emphasised that businesses must stand to benefit. The TUC general secretary, Brendan Barber, said: "Holding interest rates and resuming quantitative easing is the right thing to do given the weak state of our economy. But more needs to be done to ensure that this latest injection of cash actually reaches the businesses that need it, rather than just gathering dust on banks' balance sheets. The failure of banks to increase net lending to businesses, despite £275bn of quantitative easing, is holding back growth in the real economy."

The MPC also voted to keep interest rates at its record low of 0.5 per cent. Rates have been held at this level since March 2009.