Bank of England pumps additional £25 billion to fight recession

06 Nov 2009

The Bank of England's Monetary Policy Committee voted yesterday to pump an extra £25 billion directly into the economy to pull the country out its longest recession on record.

The Bank of England's Monetary Policy Committee (MPC) voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5 per cent and also voted to continue with its programme of asset purchases financed by the issuance of central bank reserves and to increase its size by £25 billion to £200 billion.

The world economy has shown signs of recovery, with a number of emerging market economies experiencing a strong rebound in growth, although global activity as a whole remains significantly depressed, said the MPC.

Major European nations like France and Germany as well as the US have already showed signs that their economy has emerged from recession, while the UK is still struggling under the impact of recession, which has made officials to call for further stimulus.

The MPC said that asset prices have risen internationally since the spring, reflecting both the gradual improvement in the economic climate and accommodative monetary policies. Banks' funding conditions have improved, though financial conditions remain fragile.

In the UK, output has fallen by almost 6 per cent since the start of 2008. Households have reduced their spending substantially and business investment has fallen especially sharply. GDP continued to fall in the third quarter. A number of indicators of spending and confidence, however, suggest that a pickup in economic activity may soon be evident.