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Countdown to quantitative easing

The Bank of England is later today expected to reduce interest rates to a record low as the UK economy continues to spiral downwards. While the news of interest-rate reductions will come as no surprise to those in the city and those who read the financial press, it is the potential introduction of quantitative easing which is set to catch the headlines tomorrow. In effect the UK government has given the Bank of England authority to start "printing money" and pumping it into the UK economy.

The UK government is very much in the last chance saloon as the interest-rate weapon which has been so successful in the past has diminished in power over the last few months. Quantitative easing is a high-risk strategy but unfortunately at this point in time it is the only strategy available to UK authorities as a way of trying to refloat the UK economy. The immediate threat of deflation and a possible move towards a depression rather than a recession appears to have prompted this drastic action which has been hinted at for some time.

Gordon Brown returns from a short visit to the US with the UK economy under severe pressure and his rating in the polls on the slide. Hopes that his US speech but somehow kickstart a recovery in his UK ratings appears very much a forlorn hope as UK investors and the UK public are more interested in what is happening on the streets and in the offices of the UK.

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