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Bank of England set to increase quantitative easing programme

The Bank of England monetary policy committee is today expected to agree a £50 billion increase in the quantitative of easing programme which will bring the total funds available to £225 billion. This is a situation which has been ongoing since February and while it has had an impact on the UK economy there are concerns that it is now running out of control and the extra funds may not have the desired effect in the short term.

In simple terms, the quantitative easing programme allows the Bank of England to acquire bonds and other similar assets from financial institutions in the UK in exchange for cash. The idea is that this should firm up the UK economy as well as injecting much-needed capital into the banking system for consumers and businesses to use. The fact that increased liquidity has yet to emerge in the commercial markets is concerning although there is a feeling it may just be around the corner.

In many ways the UK government and the Bank of England have little option but to increase the quantitative easing programme because they have invested so much time and effort into this particular strategy. When it will actually have its greatest impact remains to be seen.

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