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Bank of England injects £50bn into ailing economy

Decision to extend quantitative easing programme had been widely predicted after UK economy shrank last year

The Bank of England will inject billions more of electronic cash into Britain’s flagging economy, extending its quantitative easing programme by £50bn.

Economists had widely expected the Bank to resume QE after the UK economy slipped into contraction at the end of last year. BoE policymakers had warned that they saw inflation undershooting its target at the end of the year and hinted more money printing was on the cards.

At the end of its monthly meeting on Thursday, the Bank’s Monetary Policy Committee also left interest rates at a record low of 0.5%.

Most economists had expected an additional £50bn in QE, though some had forecast up to £75bn and a handful had forecast none at all.

The latest move comes on top of the £275bn announced since the scheme was launched during the recession in 2009.

The decision comes despite business surveys last week suggesting a fresh fall into recession could be averted. Those reports showed a stronger-than-expected start to the year for the dominant services sector as well as for manufacturers.

Official data earlier on Thursday showed manufacturing output rose five times faster than expected in December, but the wider industrial sector fared worse than first thought over the fourth quarter.

Analysts now await the Bank’s quarterly set of economic forecasts to be published next Wednesday in the inflation report for clues as to whether there will be any more QE later in the year.

The bank argues the scheme, under which it prints fresh money and buys government bonds, has boosted output and helped keep a lid on borrowing costs and inflation. But critics say it has done little to help businesses and households and has damaged pensioners’ finances by artificially depressing annuity rates. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds