Bank of England considering extension of quantitative easing programme

The Bank of England is rumoured to be considering an extension of the quantitative easing programme with various meetings to be held this weekend. Despite the fact that £200 billion has been put to one side for the quantitative easing programme, which effectively allows financial institutions to swap assets for liquidity, it seems as though more money may be required in the short term. This would be a bitter blow for many investors and researchers in the UK who had assumed that the quantitative easing programme was being wound down.

While there are a number of short-term considerations to take into account, in the medium term there is the problem of how and when to withdraw the quantitative easing programme without creating an unstable economy. There are concerns that the quantitative easing programme, along with the recent VAT reduction which has now been reversed, has become something of a crutch for the UK economy. If this crutch is taken away at the wrong time and the patient has not recovered we could see further damage in the short to medium term.

While 2009 may have been a very difficult year for the economy and the authorities, 2010 will bring its own very difficult and very serious challenges.