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Bank of England announces additional £50 billion to help economy

The Bank of England has today shocked market observers with news of a £50 billion increase in the quantitative easing program. This takes the figure to £175 billion, £25 billion higher than the UK government's former limit which does not bode well for the immediate future of the UK economy. The situation is made even worse by the accompanying downbeat statement regarding the UK economy and an admission that the downturn has been deeper and more severe than many people had thought.

Despite the fact that we have seen promising signals from the Bank of England and the UK government over the last few weeks, as well as a more buoyant stock market, this news has put the brakes on those hoping for a swift return to economic growth in the UK. The admission by the UK government that it has failed in its attempt to induce further lending from UK banks is also a difficult pill to swallow when you consider the billions upon billions of pounds of UK taxpayers money used to bail out the sector.

The UK government and the Bank of England are in a very difficult situation now because ultimately they have played all of their Aces and so far they have relatively little to show for this. Quite what is left in the locker remains to be seen.

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